Short sale definition A short sale is when a lender agrees to accept a mortgage payoff amount less than what is owed in order to facilitate a sale of the property by a financially distressed owner. The lender forgives the remaining balance of the loan.
A short sale does way less damage to a homeowner’s credit report and credit score than a foreclosure. This means the homeowner will be in better shape to apply for a mortgage and buy a new home down the road. Homeowners have the dignity of being able to sell their own home. This is no small thing.
- 1 Is it a good idea to buy a short sale house?
- 2 How does a short sale work for the buyer?
- 3 What is the downside of a short sale on a home?
- 4 Can you negotiate price on short sale?
- 5 Why short sales are bad for buyers?
- 6 What are the risks of a short sale?
- 7 Who benefits from a short sale?
- 8 Does short sale mean cash only?
- 9 How long does it take for a short sale to go through?
- 10 Who pays closing costs in a short sale?
- 11 What happens after a short sale is approved by the bank?
- 12 Do Banks prefer short sales or foreclosure?
- 13 Why do short sales fall through?
- 14 Do banks counter offer on short sales?
- 15 What should I offer on a short sale home?
Is it a good idea to buy a short sale house?
In short, short sales are a good idea if you have plenty of time and money. A short sale buyer may get the property at a reduced price, but the property (in all likelihood) has its share of problems — think “fixer-upper” — and the deal needs to go through considerable red tape to make it happen.
How does a short sale work for the buyer?
A short sale is a real estate transaction where the owner’s lender agrees to accept a purchase offer from a new buyer, short of what is owed by the original owner. This could be great for you, the buyer, but it could take a long time to move into your home.
What is the downside of a short sale on a home?
Disadvantages of a Short Sale A short sale comes with quite a few catches. There are more parties involved than a typical sale making the process complicated and often lengthy. In a traditional home sale, price negotiations happen between the buyer and seller (or their representatives), not the seller’s bank.
Can you negotiate price on short sale?
Can You Negotiate A Short Sale? It is entirely possible to negotiate a short sale, but doing so can be a time-consuming process. Instead of negotiating with the seller alone, as is the case with most traditional sales, short sale negotiations must be approved by the lender, too.
Why short sales are bad for buyers?
Opportunity Cost. Short sales present another risk because the lengthy short sale process could cause you to miss out on other potential purchases. With all your time and resources tied up in short sale negotiations for months, you could miss out on an even better investment opportunity.
What are the risks of a short sale?
Potential additional fees While the price of the home may be low, a foreclosure or short sale often comes with additional transaction costs. With a foreclosure, you may have to pay transfer taxes as well as any superior liens on the property. You may also have to pay an additional fee to the foreclosure company.
Who benefits from a short sale?
For the seller, a short sale presents less damage to his credit report than a foreclosure, and allows him to recover and buy a new house more quickly. This sense of cooperation between the seller and buyer may facilitate the exchange and get the new owner into the house more quickly.
Does short sale mean cash only?
No cash -out A short sale means they won’t earn any profit from the sale of the house – the bank or mortgage lender gets all the sales proceeds.
How long does it take for a short sale to go through?
A short sale can take up to six months to be approved because many factors can slow the process down. You might be able to reduce the time it takes to be approved by asking your agent for some information before making an offer.
Who pays closing costs in a short sale?
In a short sale transaction on the other hand, the seller’s closing costs are usually paid out of the money the buyer brings to the closing. Normally, the seller’s lender must approve all of these seller closing costs before a short sale can be approved and completed.
What happens after a short sale is approved by the bank?
After accepting an offer, the homeowner or his realtor must forward the offer to the lender for review. If the lender approves the offer, the short sale moves forward. If the lender does not accept the offer, the buyer may counteroffer or end the process.
Do Banks prefer short sales or foreclosure?
The short sale asking price is usually higher than the pricing at the foreclosure auction — a 19 percent loss of the loan balance for short sales. In contrast, a foreclosure typically nets a 40 percent loss of the loan balance. In this regard, lenders prefer short sales over foreclosures.
Why do short sales fall through?
Lender. Lenders may reject a short sale for various reasons, including a belief the seller has the ability to pay the loan, it has the chance to reduce losses by foreclosing, or because the offer is too low. Other liens on the home, such as creditor judgments, may make it impossible to transfer clear title to a buyer.
Do banks counter offer on short sales?
A: No it’s not illegal. The bank will offer you a price that makes sense to them.
What should I offer on a short sale home?
How to Make a Short Sale Offer
- Offer a Strong Earnest Money Deposit.
- Check the Comparable Sales.
- Don’t Ask for Special Reports or Repairs.
- Give the Bank Some Time.
- Assure the Seller You’ll Wait.
- Offer to Pay the Seller’s Fees.
- Shorten Your Inspection Period.
- Provide a Strong Preapproval Letter.