You’ve probably heard of the term “short sale” if you’re looking to buy a home. However, many people don’t have a clear understanding of what a short sale really is. When you agree to complete a short sale with a seller, it means that the lender has given them permission to sell their home to you for less than what’s owed on it. Common reasons for this include the borrower’s inability to continue making payments or depreciated value on the property.
From the lender’s perspective, agreeing to a short sale is better than having to foreclose on the property. For sellers, going through with a short sale has less of an impact on their credit rating than a foreclosure, and it allows them to get out of a mortgage they can no longer afford.
A Short Sale Must Be Approved by the Lender
Now that you understand what a short sale is, it’s important to realize that the process doesn’t transpire just because the seller wants it to. The lender must approve of the short sale first, since it means they must accept less for the property than what is owed on it. The seller needs to submit proper documentation to the lender, proving that they can no longer keep up with their mortgage payments. Lenders tend to look more favorably on this practice, as opposed to someone just abandoning their property.
Benefits and Considerations of a Short Sale for Buyers
A short sale gives buyers the opportunity to acquire a home at fair market value without the same risk associated with purchasing a foreclosed property. However, it differs from a traditional real estate sale in several important ways:
It may take longer to complete a short sale because it’s more challenging to set a closing date -- lenders require significant documentation before agreeing to a short sale.
Buyers purchase the property “as-is,” which probably means they’ll have to invest additional money for repairs or remodeling.
The seller may have to pay some money at closing. If the buyer is unable or unwilling, the sale may fall through even though the lender approved it.
Inspection fees that a lender may cover in a traditional real estate sale are the buyer’s responsibility in a short sale.
Work with an Experienced Real Estate Agent if You’re Interested in a Short Sale
Purchasing a home via short sale can save you money, but it’s also complex. An experienced agent will anticipate challenges and know how to overcome them. Longwood Residential is available to help you navigate the home buying process. Your agent will help you evaluate all options, including Longwood condos and short sales.