Potential buyers who are scouting for good property purchase deals can obtain price breaks on short sales, provided they comprehend the complete process.
What Are Short Sales?
These are transactions where homeowners put their property up for sale, for a price less than current mortgage debt. This means, that the sellers are ‘short’ of the cash they need for fully repaying their mortgage lender. Usually, lenders or bankers agree to short sales for recouping portions of mortgage loans that are in debt.
Short sales have now become rare, thanks to an improving economy. Its prevalence was highest during the 2008 Great Recession, back when most US homeowners owed more to banks for loans taken on their houses than their houses were even worth.
How Do Short Sales Work?
In a short-sale, real-world scenario, home sellers put up their properties up for sale, along with a formal designation of their sales as a ‘subject lender/short sale’ deal to attract potential buyers.
After the buyer has agreed to this short sale home offer, homeowners may contact their bank and fill out an application, requesting them to award a short sale tag for their home. While there’s no guarantee this will be accepted, short sales eliminate several hassles related to mortgage loans, like closing homeowner loan books. The lender or bank gets a loan portion that’s owed to them repaid as well.
Several documents and firms will have to be filed with mortgage lenders by home sellers during short sales. These include hardship letters, detailing reasons for non-repayment, filing of important records like tax returns and pay stubs, which prove your case.
This application will be reviewed by the bank who will then appraise the property’s full value and compare this against any short sales offers. Based on this, a short sale application may be approved or rejected.
Should You Sell Your Home as a Short Sale?
Property sellers presented with short sale opportunities are advised to vet all other options, weigh opportunities and risks, go through other financial options as well, before finally arriving at a decision.
Short sales aren’t the perfect solution for home sellers who have suffered financial setbacks and are stuck with homes with the mortgage value exceeding property value. However, it could be their best available choice.
Advantages of a Short Sale
The following benefits are available:
Disadvantages Of A Short Sale
They can result in various issues like:
Benefits Accruing To Home Buyers Due To Short Sales
Homebuyers can gain several advantages from short sales including -
Disadvantages Accruing To Home Buyers Due To Short Sales
Homebuyers may face the following disadvantages including -