What is a short sale? There a few things you need to know about short sales if you’re thinking about purchasing one.
A short sale is the sale of a property where the proceeds net the lender less money than what is owed to the lender on the mortgage note.
For example, if you sign a mortgage note that you owe a lender $100,000 and you sell the property for $90,000, it would be considered a short sale.
What a lot of people don’t know is that you can actually sell a property for more than what is owed to the lender in some cases, and it would still qualify as a short sale. As an example, if you owe $100,000 to a lender and you sell a property for $105,000, but your closing costs are $7,000, it would only net the lender $98,000, resulting in a short sale.
The other important thing to know about a short sale is that it requires a lender’s approval for the sale to go through. This differs from regular sales in which only the owner’s approval is required. The lender’s approval is required when you’re giving them less than what is owed to them.
Why would a lender ever consider accepting less than what is owed to them? Well, if the lender reviews all of the owner’s tax returns, verifies their employment, and finds out that the owner is completely insolvent, they know that there is no chance that they would ever get paid what was owed to them without selling the property. In this case, they’ll consider accepting less money over foreclosing on the property, which takes months or even years and an involves a lot of fees in some cases.
What should you know if you’re considering buying a short sale property?Statistically, short sales have a higher chance of going for less than market value than standard sales do.You have to be incredibly patient when buying a short sale property. The transaction on a short sale can take up to six months or even longer to get the bank’s approval. This is due to the amount of time it takes the bank to verify the owner’s insolvency and to determine that a short sale is in their best interest.If you have any questions about short sales or anything else related to real estate, please don’t hesitate to give me a call or send me an email. I’d be happy to help you!