What Is A Short Sale: Everything You Need To Know About The Process
Aug 18, 2022

If you’re thinking about buying a home, knowing what a short sale is essential. It is a real estate term that refers to the sale of a property for less than the amount owed on the mortgage. In other words, the seller owes more money on the mortgage than they will get from the sale of the house. This can be an advantageous option for buyers since they may be able to purchase a property at a discount and for sellers since it can help them avoid foreclosure. This blog post will discuss everything you need to know about short sales!

What is a short sale?

A short sale transaction can occur when a homeowner’s mortgage loan balance exceeds the market value of their home.

In other words, the house’s value does not reach the balance of the mortgage debt. Real estate agents know this scenario as “underwater” or “negative equity.”

In a short sale, the homeowner needs to sell their underwater home, for which the mortgage lender grants permission for the property to be sold for less than the outstanding balance.

The lender will lose money but agrees to sell the property to avoid the foreclosure process, which could cost even more. In a way, a short sale can help both the lender and the homeowner. And it also helps the buyer.

What is a short sale, and how do real estate agents participate?

The short sale process is much like buying a home off the market.

But at any of these stages, there are unique challenges for short-sale homes. This is what you need to know.

 

Step 1 – Find a Short Sale Home

Although you could search for properties on your own using a Multiple Listing Service (MLS), it’s best to hire a real estate agent who has experience with short sales.

A good agent will check the title, determine if a foreclosure notice has been filed, and determine how much the lender is owed. This data will help prepare a competitive offer and a better deal for you.

Step 2 – Getting pre-approved for financing

Is a requirement. Without financing, a bank is likely to withdraw your offer immediately.

Fortunately, getting pre-approved is relatively quick and easy, as lenders can verify your credit score and financial documents in just one day.

Step 3: Make the offer.

Although you may be able to buy below the sticker price, please don’t count on it. Real estate agents will help you make a reasonable offer based on the house’s value.

A real estate agent who knows your local real estate market can show you comparable properties (“comps”) that have recently sold, so you can make a realistic offer.

Step 4: Negotiate the short sale and contingencies

You and your agent must also prepare a short sale addendum with certain contingencies. “Contingencies” are conditions that must be met before the home sale can take place.

For example, you probably want your offer to hinge on lenders’ approval of the sale, how long you’re willing to wait for short sale approval, and how much you’ll pay in closing costs.

You probably also want a short sale to depend on the results of a home inspection and other factors that can further lengthen the process.

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