Selling and Buying with a Short Sale
During these times of economic troubles, you may have heard the term "short sale" mentioned on the news or possibly within real estate circles. But, do you know what the term means? If not, it is important for you to do your research and to learn more about short sales, as you can be affected by this type of sale whether you are the buyer or the seller.
Facing a Harsh Dilemma
A short sale is a specific type of real estate transaction that involves completing a purchase that is less than what is owed on the property. For example, a homeowner may purchase a home for $350,000 and take out a loan for $300,000 for its purchase. As a result of the economic problems the world is facing, however, the homeowner may not be able to continue making mortgage payments on the home. Even worse, the value of the home may have fallen to just $220,000, which means the homeowner owes more on the home than it is currently worth. Obviously, it will be impossible for the homeowner to sell the home at a price that will help him pay off what is still owed on the property. This is where the short sale comes in.
Going for the Short Sale
In a situation where the homeowner owes more on the home than he can recoup through its sale, the bank or mortgage lender may agree to discount the balance due. This way, the homeowner can get out from under the loan without having to file bankruptcy and the lender can cut its losses rather than trying to collect the full amount due.
Of course, getting a short sale to go through can be a very time consuming and difficult process. After all, banks are not in the business of forgiving loans on a regular basis. At the same time, agreeing to a short sale can potentially be the best business decision for the lender.
If you are trying to sell a home and you owe more on it than it is worth or if you are trying to purchase a home at its decreased value but the owner still owes too much on the home, you can discuss the possibility of a short sale with the lender's loss mitigation department.
It is important to note that completing a short sale can be very time consuming and the lender has the right to approve or disapprove of the sale. In addition, the entire balance due after the sale is complete may not be forgiven. Rather, if you are the seller, you may still be responsible for a portion of the remaining balance. Therefore, it is important to discuss all of your options with your lender and to come up with the plan that is best for everyone involved.
About the Author:
Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for http://www.byownermls.com/, a For Sale By Owner MLS service, the leading real estate search engine of homes for sale by owner (FSBO). For more information, please visit http://www.byownermls.com/.
2 comments:
I live in the Chandler area. I have already been pre-approved by several banks for FHA loans and have excellent credit. I am willing to pay down payment, but need help with closing costs. I have made an offer on a short sale. I was the first offer, but now there is another. I am offering list price and my down payment and am only asking for closing. It seems like I may not get this home as the other offer is similar. The seller's realtor will not tell us anything else and has been very hard to get a hold of. Originally he had told us he would let us know about any other offers. My agent said he did not tell us about the other offer until she finally tracked him down. My agent says he will not return her calls. I went through something similar with another home I wanted. I am perplexed as to what I am doing wrong. Everyone says it is hard to find buyers that are pre-qualified right now, etc., but I have been pre-approved, have good credit, have the down payment, and am having the hardest time having my offer accepted. It is very discouraging and I do not know if I should change my realtor, make higher offers, or what I have to do to have an accepted offer. Do you think I should call the seller's agent and talk to him personally or call their lender and talk directly with them. I do not even know how to find out who their lender is. Is there any way to do that? I am starting to even doubt that my agent is doing what she said she is. Please help!
The dearth of commercial real estate transactions and increasing constraints on credit continue to plague every geographic area and property type. However, recent measures taken by governments around the world may help boost liquidity and end the lingering paralysis currently pervading the market. More readily available capital could increase the number of available investors able to bid on properties as more property owners become distressed and are forced to sell.
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