Are you a first-time real estate buyer? If so, now is the time to act. Most experts say the real estate market is in a poor state. Yes, this is true, but mostly for sellers. If you have the needed financial resources now is the time to buy. To improve your chances of making a profit or getting the best deal, look at short sales. They are increasing in popularity and present many opportunities for buyers.
If you are unfamiliar with the real estate market and short sales, you may be looking for more information. Please continue reading on for short sale information and the answers to commonly asked questions.
Question: What is a short sale?
Answer: A short sale is used to describe the process of selling a home for less than the outstanding mortgage. For example, if a borrower still owes $50,000 on their mortgage, the lender may be willing to sell the home for $40,000 or less.
Question: Is there a difference between short sales and foreclosures?
Answer: Yes. In many ways, they are similar. The borrowers and current homeowners must leave the home, but there is a huge difference in how it comes about. With foreclosures, home occupants are forced out of the home. With short sales, they were involved in the decision to sell, so they are already prepared to leave. Also, short sales are sold directly through the mortgage lender or a real estate agent. Foreclosed properties are typically sold through an auction.
Question: How does a short sale come about?
Answer: The process begins when the borrower realizes they can no longer afford their home. This may be due to job loss, a pay reduction, adjustable rate mortgage, or just poor financial choices. Typically, a borrower asks a mortgage lender about a short sale. They do so because one is less damaging to a credit report than a foreclosure. The mortgage lender reviews the borrower’s assets, income, and hardship letter. Unless the lender believes they can get more from the property in a foreclosure auction, most will opt for a short sale.
Question: What types of properties are sold via short sales?
Answer: All. Most short sale properties are single-family homes. Right now, these are the individuals most likely to fall behind in payments. The owners of multi-family homes and commercial buildings should have income coming in from tenants. That does not mean the property cannot enter into default, it is just less common.
Questions: Are shot sale properties a good deal?
Answer: Most of the time, yes. Short sales involve selling a home for less than the amount due on a mortgage loan. Lenders who agree to a short sale have already accepted the fact they will not get all of their money. Still, some is better than nothing and lengthy foreclosure proceedings. Since most have already accepted the fact, they are willing to take a loss and offer a great or decent price. The only instance in which a short sale may not be a good deal is with underwater homes. This is when the borrower owes more than the home is worth.
Question: How long does a short sale take?
Answer: It depends on the lender in question. With short sales, the borrower has no say. The lender makes all the decisions. Small banks, where the supervisors are onsite, can have an answer for you by the end of the day. Most often, it may take a month or more.
Question: Should I have payment for a short sale property upfront?
Answer: It is not required, but will be beneficial. If you need financing, acquire it upfront or get pre-approved. A mortgage lender is more likely to accept your purchase offer and quicker when you can pay right away.
Question: Can I bargain for a lower price?
Answer: It will not hurt. Mortgage lenders are already taking a loss with short sales. For that reason, they will be less likely to lower their selling price. If you have cash in your hand and are ready to pay, bargaining for a lower price may work.