3 min read
What Are the Benefits of a Short Sale?
You have found the home of your dreams; it has everything you want, from the perfect walk-in closet to a large island with granite countertops. Then you discover the low price; could this be real? Your realtor explains the reason; it is a short sale. You feel your heart sink, but your realtor tells you not to worry because there are some great benefits of a short sale.
What is a Short Sale?
A short sale is when a homeowner must sell their property for less than the amount due on their mortgage because they can no longer keep up with their payments. All of the money from the purchase price goes directly to the lender.
After this, the lender can go two ways:
- Forgive the difference between what the borrower owes and the mortgage amount (some states require lenders to forgive).
- A deficiency judgment requiring the borrower to pay the remaining difference between the sale price and the loan amount.
Benefits of a Short Sale?
While there are some things your realtor will tell you to be cautious of, let’s focus on the positive aspects of the benefits of a short sale. The biggest attraction to this type of home purchase is the lower cost compared to another similar house.
The cost is lower because the seller has posted the house for less than what is due on the mortgage. As such, a potential buyer can walk away feeling like they practically stole the home. Because there could be some competition, a lower cost means you can likely increase your bid and still secure the house within your price range.
Benefits of a Short Sale > Minimal Negotiations
Often what deters a lot of potential buyers is having to negotiate with the seller of the home. When you are involved in a short sale, you are less likely to negotiate with the seller because the seller wants to get the best price possible to appease the bank.
No More Outbidding
While your price range may mean that you have to outbid dozens of rivals for the home, thus putting you out of the running, a short sale might allow you to be ahead of other prospective buyers who are already at their maximum amount.
Some Words of Caution
As a buyer, you may want to be aware of a few potential issues. First, it is up to the mortgage lender to approve a short sale. Second, you will want to ensure there is room for potential profit if you decide to resell the house. But don’t worry, in both of these possible situations, your realtor can discuss with you to make sure you understand.
Benefits of a Short Sale Conclusion
Potential buyers who have had a tricky time finding that perfect house within their price range may want to consider buying a short sale. Not only can they potentially have fewer negotiations and less chance of being outbid, but they likely will gain a new home at a great price. To be sure that a short sale is right for you, take the time to talk to your real estate agent and get all the facts.