
When Should I Hire A Real Estate Attorney?
December 8, 2020
3 Reasons to Use a Real Estate Attorney When Buying a Home
February 16, 2021In times of financial distress, one can agree with a lender to take up a mortgage payoff less than the amount owed so the owner can trigger a quick property sale. In short, because of the difficulties at hand, the lender assumes the remaining loan balance and forgives the property owner. A short sale situation differs from a foreclosure auction or even one that is owned by a financial institution like a bank.
A short sale is activated when the lender assesses the situation and realizes that there is a significant depreciation of the home, and the remaining debt exceeds the worth of the home. The homeowner has no option other than discarding the property of negative equity. A short sale has no similarities with a foreclosure, because, in the latter, the lender repossesses the depreciating property, and sells it to recover the costs.
Who Relishes a Short Sale?
A short sale can have implications on all the parties involved; the seller, the lender, and the buyer. For a seller, the credit score can be damaged but not with an equal magnitude as in the foreclosure situation. The seller will also be homeless, and more so without money. Since foreclosure is more harmful to the seller’s credit rating, short sales help to forestall the impact, because there is a chance to convince the lender to forward the cleared loan details to the credit bureaus.
The buyer acquires the property at a discounted price; however, it has several issues because it might demand some reconstruction, redesign, or redecoration. The lender can demand more closing costs from the buyer to be transferred to the mortgage holder. The financial loss a lender experiences might be tangible, but not as much as how it would have been if a foreclosure was activated. In a short sale deal, everyone should agree to get less or even no money in the end. Short sale deals are therefore complicated, long-lasting, and even at times, they fall through.
Should one Sell a Property via a Short Sale?
The decision of whether to take this route depends on the individual situation that needs to be assessed independently in the quest for the best solution. If one cannot afford the mortgage, and the property is rapidly depreciating, then a short sale is the ultimate choice, and by so doing, the creditworthiness will be preserved.
Procedure for Purchasing a Property via a Short Sale
An agreement with the lender must be reached so he or she can know that the full payment will not be made.
The seller should confirm that no other alternative is available because of the financial hardship at hand because the lender is not willing to experience a foreclosure.
The property value must match that in the market, and not during the faltering market moments.
Timely disclosure of short sales to facilitate easy negotiations between the lender and the potential buyers.
The short sale buyers must do a thorough property inspection, assess the insurance and legal details, and allocate enough time for closing.