How a Short Sale Helps the Buyer and the Seller
There are several different types of real estate listings that you will see on the market. Most people are familiar with the regular listings and also with foreclosures. But, when they see “short sale” as a listing they aren’t always sure what it means. This is true for both buyers and sellers.
In reality, there are advantages to both parties.
What is a short sale?
A short sale is when a seller has to sell the house for less than what they owe on their mortgage, thus making it “short” of being able to payoff the loan. There are some similarities to a foreclosure, but there are some very key differences.
In a foreclosure, the bank has taken back possession of the house. That means the original owner plays no role in the process at all.
During a short sale, the bank has not taken possession of the house. The homeowners are in a position where they have to sell because they can’t continue to make their mortgage payments, but they haven’t been able to sell for the amount they need to pay off their loan.
In order to avoid the foreclosure process, the homeowner and the bank work together to sell the house at a loss. The homeowner lists the house and does the work for it, but it’s the bank that has to give the final approval to accept an offer. The homeowner is not able to accept it on their own because they lender is going to be losing money on the deal. That means they get a final say in how much they are willing to lose on the deal.
What are the advantages to the seller?
The reason a seller would want to go through a short sale is because it allows them to avoid going through the foreclosure process. While a short sale does damage your credit score, it doesn’t take the same toll on it that a foreclosure does.
What are the advantages to the buyer?
The advantage to the buyer is that they are getting a good deal. They are able to buy the house at a price that might be below the market value. And, since the homeowners are still living in the house, there’s a chance that it’s going to be in better shape than if you purchase a foreclosure that has been sitting empty for months.
The disadvantages
The disadvantages to the seller are obvious. They are selling their house at a loss, so they aren’t able to make a profit on it. Their credit score is also going to take a hard hit.
The disadvantages to the buyer depends on the situation. There are times the banks can take longer to respond making the process drag out longer than it would if they were to have bought a regular listing.
If you are interested in selling or buying a short sale you should look for a real estate agent that specializes in the process. They are able to guide you through the process while answering any questions that you have as you proceed.