Is buying a short sale a good idea?

A short sale buyer can get the property at a reduced price,. The bottom line for the seller Short selling is often preferable to foreclosure, but it's not a solution to all of a homeowner's financial problems.

Is buying a short sale a good idea?

A short sale buyer can get the property at a reduced price,. The bottom line for the seller Short selling is often preferable to foreclosure, but it's not a solution to all of a homeowner's financial problems. In addition to potential tax liabilities and credit implications, if the landlord is expected to pay the difference between the sale price and the mortgage, that can aggravate the financial difficulty. To this end, the Consumer Financial Protection Office recommends asking the lender for a written exemption from the deficiency.

Depending on the difficulties, there may be an alternative to short selling that puts the owner in a better financial position. HUD approved financial counselors are an incredibly useful resource that helps struggling homeowners with free advice and objectives. Short selling is a mix for the buyer, seller and lender. Real estate markets are flooded with short selling and, according to the National Association of Realtors, that number is only expected to increase in the near future.

So, if you're looking for a new home, there's a good chance you'll fall in love with a house listed for short sale. If you're thinking of bidding on a short sale, here's some basic information you should know. WHAT IS A SHORT SALE? A short sale is a real estate transaction in which the owner's lender or lenders agree to accept a purchase offer from a new buyer, below what the original owner owes. In a short sale, the seller's agent puts the property up for sale and picks up the seller's “hardship” package, which includes bank statements, information about the loan and a letter of difficult living conditions explaining why he had to make a short sale.

Then, when you, as the buyer, submit an offer to buy a short sale, the agent presents that offer, along with the hardship package, to the lenders and begins the negotiation process. One of the biggest challenges is getting multiple lenders involved in short selling. Even though junior lien holders would be annihilated if the home were foreclosed, they often require monetary contributions to release the lien. This can also lengthen the negotiation process.

You've probably heard horror stories of buyers waiting six months or more to find out if their short sale offer is accepted and then receive a counteroffer at a much higher price than they can afford. While a few lenders can accept short selling offers in a month or two, acceptance usually takes four to six months, or even longer. And when there are junior lien holders, everyone will normally have their own pricing opinion (BPO) of the broker on the property before accepting the offer. When viewing properties, find out if short sales have been “approved” or not.

Approved short sales are those where the lender has already agreed to take a specific price. Short sales that haven't been approved yet are the ones that take the longest. Good communication from your agent can make this period of anxiety pass more quickly. Don't forget that just because you have a pending offer for a short sale doesn't mean you have to stop looking for homes.

Is it possible to save money by buying a short sale? However, not all short selling is automatically a deal. Make sure your agent provides you with recent comparable data (statistics on active, pending and, most importantly, recently sold homes in the area with similar characteristics). Just because the seller doesn't receive money from the sale of the house doesn't mean that they will automatically accept your offer. Keep in mind that bid wars can occur before the listing agent submits the best and highest offer to the lender.

How do you ensure that your offer is accepted above others? There's no winning formula, and it's not always about the highest price. For example, funding and conditions are also important. An important point to keep in mind is that, in some short selling transactions, junior lien holders may require the purchaser to provide extra money to release the liens. Finally, if you are going to buy a short sale, don't expect them to do any repairs.

Lenders generally don't pay to repair anything, such as cracked slabs, broken windows, or leaky roofs. Although they can pay for termite fumigation when needed, they won't pay for any cosmetic repairs or concessions. So don't make an offer on a short sale that clearly needs work if you don't have the skills to do the job yourself or the money to hire someone to do it right. Have you bought or made an offer on a short sale? How did it work? Share your story in a comment.

A real estate short sale is an offer of a property at a sale price lower than the amount owed on the current owner's mortgage. A pre-approved short sale is when the lender approves the sale price of the home before it is marketed to the public. This is a great sign that the bank and the borrower are eager and ready to sell the property. As the sale is negotiated, the bank may reject any or all of the offers.

Banks are known for their slow response times because there are a lot of moving parts in a short selling transaction. The bank's main objective is to recover as much money as possible from the sale, so offers below market value or below the amount owed for the rest of the mortgage are likely to take some time to be approved. A definite advantage of short sale ads is that there isn't as much competition. Because many prospective buyers are also first-time buyers, they tend to shy away from anything other than a standard transaction.

If you still have cash assets, you are expected to use them to continue making mortgage payments or to offset the gap between the sale price and the mortgage amount. A short sale is less harmful than a foreclosure, as long as the landlord can persuade the lender to report the debt to the credit bureaus as “fully paid.”. However, investors should understand how these loans work before making a short buy offer, as this will place them in a much better position to close. This is because a short sale doesn't harm a person's credit score as much as a foreclosure does, and the bank is likely to lose less money on a short sale than in a foreclosure.

A short sale is when a mortgage lender agrees to accept a lower mortgage payment amount than is due to facilitate the sale of the property by a homeowner with financial difficulties. A short sale or foreclosure are two possible outcomes for homeowners who are behind on their mortgage payment, own a home that is under water, or both. In any case, the lender must approve the short sale, which means that borrowers sometimes act as they please. A short sale only occurs with the lender's permission when the value of the home has declined and the mortgage holder owes more than the home is worth.

Many buyers are willing to ignore these points because they feel that getting a home at a much lower price makes it worthwhile. While a foreclosure basically allows you to leave your home, albeit with serious consequences for your financial future, such as having to file for bankruptcy and destroying your credit, completing a short sale is labor intensive. A short sale also allows the homeowner to reduce the amount they charge when they sell the house. The buyer's prior approval for financing may expire while everyone waits to receive information from the seller's lender.

The landlord is required to sell the house to a third party, and all proceeds from the sale go to the lender. Of course, you want to sell the house as close to the value of your mortgage as possible, but in a bear market, there's likely to be a deficit. Short sale properties are found in the MLS and online real estate markets and can simply be designated before foreclosure in the listings. In some states, even after a short sale, the bank expects you to pay all or part of that deficit.

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George Deschene
George Deschene

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