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Whether you’re on the buying side of the fence or selling, getting involved with a short sale might be the perfect situation for you. Though they have been around for a long time it wasn’t until the housing market crash of 2007 that more and more distressed sales came up to the surface. In fact, the influx of short sales that took place in our housing market skyrocketed after millions of homeowners suddenly found they owed much more on their properties than they were worth.
But if you are careful and mindful of all the benefits and drawbacks of selling (or buying) a short sale, you can enjoy the best of both worlds. Here are a few reasons to consider before making a decision:
Short Sales For Sellers
BENEFITS
Ability To Salvage Credit
When homeowners engage in a short sale as opposed to letting their home go into foreclosure they are causing much less damage to their credit than if they were to walk away from their mortgage commitment. Not only do short sales harm a credit report less but they also demonstrate commitment, accountability and responsibility to your debt.
Can Purchase A New Home In About 2 Years
Homeowners that opted for a short sale are able to recover financially in far less time than if they had allowed foreclosure. Where a foreclosure will remain on your credit report for up to 14 years, the negative impact of a short sale only lasts about 24 months, allowing the homeowner to recuperate and get back into a home relatively soon after the short sale.
Little or No Agent Fees
Given that it is a matter of distress, many agents will not charge any fees to process a short sale transaction. In fact, these types of real estate transactions can only be performed by licensed, certified short sale experts.
DRAWBACKS
It May Take a Long Time To Sell the Home
Since banks are involved in every step of the process it can take many months to turn the sale around. Even if you receive a good offer on the home, unless your bank processes the offer, accepts it and puts it through several approval procedures, you will not be able to sell the home as quickly as a conventional sale.
Banks May Not Accept Your Chosen Selling Price
Selling a short sale home entails the homeowner deciding on a price to list the home. Even though most people utilize the services of a Realtor to assist with setting the list price, banks will not always accept the price. Whether or not it will be accepted will be determined once an offer goes through the pipeline.
Complicated When Multiple Mortgages/Lenders Are Involved
In many cases homeowners facing foreclosure that are contemplating a short sale have taken out more than one mortgage on their property. Going through a short sale when it involves multiple lenders can become tedious and complicated since moving ahead with the transaction requires the approval of each lender.
Buying Short Sale Properties
BENEFITS
Great Deal On A Good Home
The single most compelling reason to buy a short sale property is because it allows buyers to afford the home of their dreams at a very affordable price. Though sellers of short sales are interested in getting as much money as possible for the property, the selling price is less than standard sales. Also, since the homeowners still live on site in many cases, chances are the condition of the home will be better than what a buyer might find in a vacant foreclosure property.
Strong Potential For Solid Return On Investment As Value Will Go Up Eventually
Getting the house for a lower price amounts to being able to cash in on a greater return on your investment later on. As long as the buyer plans to remain in the property for a while the home will appreciate eventually, rewarding them with a good financial return on their purchase.
DRAWBACKS
No Disclosure Statement
One of the first things short sale buyers must come to terms with is that the short sale home they are considering will not have a disclosure statement as is with standard sales. This can be a difficult thing for buyers since they would have to rely on the home inspection and appraisal rather than the otherwise required by law disclosure sellers must provide to buyers in regular real estate transactions.
Unknown Processing Times
The most commonly asked question Realtors specializing in short sale transactions hear is “how long will the process take?” and the answer is always “it depends”. If a buyer is in a hurry to get into their new home they should strongly consider whether a short sale property is right for them. A lot of patience is required since it can take months to follow through with all the processes involved and to obtain approvals from each department involved at the bank.
Lots of Negotiating And Re-Negotiating
Banks may or may not agree or accept the offer made by a buyer so the result is a lot of going back and forth during negotiations. This can add a significant amount of time to the transaction, end up in frustration possibly leading to the deal completely falling through.
If you are in a tough situation and are considering putting your home up for a short sale to avoid foreclosure – or if you want to take advantage of the great interest rates coupled with lower home values right now, call us today and we will get your questions answered. We look forward to helping you achieve the best outcome possible!
