A short sale can be defined as a sale of property yielding an amount less than what is due on the balance of the note. Usually, this is due to a financial hardship that is experienced by the homeowner. After negotiating with the lender, the homeowner will usually sell the property and hand over the proceeds of the sale to the bank. This may or may not satisfy the obligation of the note, based on how the deal is structured. Short sales are often a solution homeowners will evaluate prior to going into foreclosure. In many cases, short sales are cheaper and less complicated than the foreclosure process.
Most creditors require the borrower to prove they have an economic or financial hardship preventing them from being able to pay the deficiency Creditors holding liens against real estate can include primary mortgages, and second mortgages, home equity lines of credit, home owners association HOA (special assessment liens) all of whom will need to approve individual applications for a short sale, should they be asked to take less than what is owed.
The biggest advantage to buyers is clearly the ability to move into a new property at a great discount. Moreover, buyers may find that short sales have an additional benefit over foreclosures too, since unlike a foreclosure, there’s not much of a risk that the buyer will need to take action to remove the seller from the property.
Although Short Sales can be great for Buyers, they may or may not be for the Seller. In some cases the Lender may not offer to relieve the seller of the responsibility of paying off the balance of the loan. So, sellers should get a solid commitment from lenders that states this is part of the terms of the sale. Also, though the seller is avoiding a foreclosure, short sales often affect the Seller’s credit score. So, sellers should discuss this issue with their lender to figure out how the Short Sale will be reported to the credit agencies.
Buyers need to be concerned too, since getting a deal on a short sale is not as easy as it may sound. In fact, there are some extra steps that buyers need to take when entering into a short sale, which can require doing some additional homework and getting the right paperwork.
Of course, if you’re a buyer considering entering into a short sale, it would be wise to consult a real estate professional who can answer your questions and help you navigate the process. This way, you can be better prepared to pull together all the appropriate information you need to complete the transaction and move into your new home.
If you owe more than your home is worth and would like to know your options, please contact – Mark Lackey @ 404.886.8789.
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