People all over are talking about some of the amazing deals in the real estate world right now. Some of unimaginable deals can seem quite tempting after all the housing market crisis has taken us through over the past few years.
Over the past 18 months, the buzz going on about short sales, foreclosures and bank owned property has hit an all time high. We can barely walk a block or turn on the TV or radio without hearing someone speaking about the supposed great benefits of investing in troubled homes. This applies even more if you’re an online surfer that likes researching information about the current state of our housing crisis.
What is a Short Sale?
Basically, a short sale is an agreement made between a lender and a delinquent homeowner who is facing foreclosure. The home is sold for less than the amount owed on the loan, in place of foreclosing on the property.
Short sales are becoming more and more common these days. This is due in part to market prices dropping so far below current mortgages held by distressed homeowners. The short sale process saves the bank the time, money and the hassle of having to physically evict the owners after the foreclosure is complete. The banks decide to “play nice” and “forgive” them for the reduced amount of the loan payoff.
Benefits of a Short Sale
Although this may sound nice, it is important to note that a buyer has to be found who agrees to pay a price that the bank will approve of. And, it needs to be done fast to avoid the foreclosure proceedings. Hypothetically, all the parties involved can benefit from short sale deals. Here are some of the benefits each party can possibly celebrate:
- The seller is released from the financial burden of a loan they can no longer afford to pay. That’s when they can begin their road to financial recovery and try to move on with their lives. They also avoid having a foreclosure on their credit report, which lasts 7-10 years. Although a short sale is also a negative hit on their credit report, it is nowhere near as bad as a foreclosure. There have been instances where sellers have been able to qualify for a new home loan in just two years after the short sale.
- The buyer ends up with a new home at a very great price. The discount price is usually anywhere between 10-50 percent less than what the seller originally purchased the home for.
- The bank now has one less distressed property to worry about. They make a quick buck, too. It may be less than what was owed, but it’s 100 percent more than what they would have gotten out of a foreclosed homeowner.
A short sale can be a lifesaver for a distressed homeowner. Although the process is nowhere near as simple as people think, it can still be beneficial if done right. Remember, you need the right buyer, and you have to have the patience it takes to negotiate the terms with your lender. It can be a quite frustrating experience. But, it just may be worth it to get relief and unbind yourself from mortgage payments you can no longer afford. If you need assistance, an experienced realtor will be able to help you.
This article was written by Mitch Ribak a Titusville FL real estate agent who also specializes in helping home buyer purchase short sales in the Palm Bay real estate market to and has vast experience in helping home sellers sell their Melbourne Homes.
