With low inventory, maybe not the income you would like, and rapidly rising home values, finding a home in your price range can be a difficult task. If you are a homebuyer and have encountered this problem, you may want to consider a short sale: purchasing a home that is in foreclosure or that has been foreclosed on.
The term, ‘Short sale’ occurs when the proceeds from selling the property are less than the debt owed. If the property owner is facing substantial hardships to repay the debt in full, the lender will forgive and agree to accept less money than the debt amount, without further foreclosure proceedings.
According to CoreLogic’s reports, in October 2016, 2.6 percent of U.S homes had gone through a short sale transaction.
Tampa Bay, Florida- Nathan Bangs, real estate agent and certified distressed property expert (CDPE) for a real estate franchise Keller Williams Realty says, many homebuyers interested in short sale overlook the complicated steps involve in a process and only focuses on a great deal they’ll get.
Bang added: “They hear ‘short sale,’ and they hear ‘fire sale,”’
Not every buyer is a good candidate for the short sale transaction.
To purchase a home as a short sale, buyers should make sure they have these four things:
The basic difference between a traditional transaction and a short sale is the amount of time it takes to get approval from all lenders involved.
Bang says, “If you happen to fall in love with a home that happens to be a short sale and you have time, it’s OK to write up an offer. If you’re short on time … if you’re adamant that you need a home in the next 30, 60, 90 days, then we need to uncheck the box ‘search for short sales’ and just focus on traditional sales.”
Min Alexander, the senior VP of real estate services Altisource, says any home buyer should have a strong offer on the table, if not an all-cash offering then at least a large down payment.
“What type of down payment can they present to demonstrate to the lender that this offer should be approved because it’s a solid offer with a low risk of fallout?” Alexander asks.
- More cash
Be ready to put up more cash than your initial offer. Because the primary lien holder will not always agree to pay in full to any secondary lien holder, you will have to negotiate with these lien holders, if you want approval on the sale.
“These have to be satisfied before the lender can approve because it will impact the final proceeds that will come out of the sale,” Alexander says.
Jacobson added: “The buyer is at a big disadvantage if there are repairs needed, and that’s probably at least two-thirds of short sales.”
- Other options
The best option available to home buyers is to watch for all other types of listings if you’re considering purchasing a short sale.
A real estate investor and homebuyers who are looking for a big return on investment should watch out for good deals for all sale types – whether it’s a traditional listing, short sale, or foreclosure auction.
Should you have any questions related to foreclosure or a short sale transaction, please visit our website www.unitedcounselors.org.