What Are Short Sales?
Real estate short sales are accelerated home sales conducted when a home’s market value is less than what is owed on its mortgage. Generally, homeowners use a short sale transaction to sell the property when they are facing foreclosure or unaffordable mortgage payments. In these cases, the borrower must prove financial hardship and submit a short sale application to the lender.
How Does a Short Sale Work in Real Estate?
In order to proceed with a short sale, the seller must go through a lender, typically a bank. The seller must provide a hardship letter to the lender explaining their financial distress and the necessity of the short sale. Once the lender approves the short sale, they will decide to forgive the remaining mortgage balance or pursue a deficiency judgment requiring the borrower to pay back all or part of the difference.
Additionally, a short sale can be a safer option against a borrower’s credit score than foreclosure. Although both will lower the borrower’s credit score, short sales are significantly less damaging. For instance, you can apply for a new mortgage or home loan in less time after a short sale than after a foreclosure.
How to Buy Short Sale Real Estate
On the other side of the transaction, buying a short sale property is a unique process. When buying a short sale property, you’ll want to negotiate the terms and asking price before finalizing the transaction. However, you’ll also want to pay attention to the condition of the property.
Given that short sale homes are quick solutions for desperate sellers, they may not be in the best condition. Short sale homes may have a lower upfront cost than new ones, but their condition may require greater financial investment. For example,replacing plumbing, landscaping, electricity, and roofing can cost more in repairs than the home’s overall market value.
Short Sale Attorneys That Are Here to Help
If you need a short sale real estate attorney, Koch & Associates law firm is here to help. We’ll work through all the legalities and paperwork of a short sale whether you’re the initial borrower or new buyer. Call us at 708-656-9900 to schedule your initial consultation.