Although the number of short sales and foreclosures has gone down as the real estate market has improved, they are still on the market. If you find yourself looking at a short sale, what can you expect with this kind of transaction?
A short sale is a transaction where the bank lets the delinquent homeowner sell the home for less than what is owed. The borrower then finds an agent and puts the house on the market at a large discount. This saves the lender the expense of a foreclosure and possible long-term cost of owning a foreclosed home that is hard to sell. A short sale is better than a full-on foreclosure for the homeowner. It also looks better for the person looking to buy the home. A buyer is then able to purchase the home at a lower price than what it would sell for if it weren't a short sale.
Even though it takes the bank agreeing to sell the home for less than the value of the current loan, short sales most often have the most cost-effective option for the bank. The bank will typically offer a lower interest rate or other buyer-friendly terms so that the property can sell and the bank can avoid any unnecessary expenses. This gives the buyer better financial options.
Short sales tend to take a long period of time, warding off other buyers who need to buy a house quickly. This lowers the competition and makes it easier to get the property at a lower price. With less competition, a buyer has a better chance at avoiding counteroffers and getting the short sale to process quicker.
The lender is eager to get their money back during a short sale, so buying a short sale home benefits the buyer because the lender is going to offer the home at a lower price. An experienced agent can help guide the buyer during a short sale to ensure everything is moving as smoothly as possible.
One of the concerns with buying a foreclosed home is that the previous owner is more likely going to ransack or destroy some of the property. In a foreclosure, the owner is still living in the home, giving them the chance to destroy the place during that period of time. Short sales are still occupied, but the owner is less likely to destroy the property because they are getting help with selling their home through short sale.
A short sale helps the lender, borrower, and potential buyer in many ways. The lender is able to get their money back in the long run, while the borrower is being assisted in their financial situation and the buyer gets the home at a lower price. Potential buyers need to be patient and cautious with the short sale process in order to benefit from it.
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