Posted by admin on April 23, 2018
What is a Short Sale and What Are the Requirements to Buy One?
Every potential home buyer is looking for the best deal on their dream home. If you are watching a tight budget or just want to get the most for your money, you may be consider purchasing a short sale home. Short sale homes are often lumped in with homes that have entered foreclosure but they are different and what goes into purchasing them is different as well.
Difference Between Short Sale & Foreclosure
It is important to first distinguish the difference between a short sale and a foreclosure. A home enters foreclosure when the homeowner falls behind on mortgage payments and the lender takes back the property and then sells it to a new owner. A short sale is when a homeowner owes more on their mortgage than the market value of the home and they ask the lender for approval for a short payoff of the loan. The lender will only start the short sale of a home once the buyer has begun to default on payments. When a home is sold as a short sale, the homeowner will make no money from the sale of the home. Additionally, if the homeowner has field for bankruptcy a lender will not approve a short sale of a home.
How Do You Buy a Short Sale
Purchasing a short sale is, generally speaking, the same as purchasing any other home. But, the reality of purchasing a short sale is often very different than other for sale homes. First, a typical escrow when buying a home is generally 30-60 days. When buying a short sale it can take months (it is not unheard of it taking 6+ months) to actually close on the home.
Is a Short Sale a Better Deal?
In some instances you can get a screaming deal when buying a short sale. But, it is important to understand that that may not always be the case. Even if a seller accepts your offer, the lender must still be satisfied with the offer. The lender wants to recoup as much as possible on the short sale so they are going to try to get as much as possible or weigh the costs of a short sale against the costs of a foreclosure to see which is better for them. Additionally, many short sales are fixer-uppers or are in some state of disrepair that will require money for upgrades.