Ever since the mortgage crises, short sales have become an increasingly popular alternative for homeowners who can no longer keep mortgage payments current. When a property is valued at less than the balance still owing on its mortgage, the lender has the option to accept less than the total amount due, as opposed to foreclosing on the property. This type of transaction is known as a short sale, because the bank accepts less than the amount owing on the mortgage.
It is estimated that a bank can save up to 30% on foreclosure costs by granting a short sale. Not all properties, however, are eligible for a short sale. In the end it will be up to the bank to decide if it is in their best interest to grant a short sale instead of a foreclosure.
What qualifies a property for short sale?
Banks will consider a property for a short sale if the home is valued at less than the balance of the mortgage, if the seller has a hardship, and if there is a buyer willing to purchase the home.
What’s the catch?
The biggest downside to a short sale is the mark it makes on your credit score. Though the words “short sale” won’t be stamped on your credit report, there may be words like “settled for less” or “paid in full for less than agreed,” which can remain on your report for up to seven years.
How a real estate agent can help
Ever since the banks introduced the option of a short sale, many agents have pursued further education to become specialized short sale agents. These specialized real estate agents help determine the type of short sale that is best for you, handle the required paperwork, help the seller price the short sale home, put the home on the market, negotiate the sale, and submit the short sale approval. Because of the expertise required, this particular branch of real estate benefits greatly from experience. If you are interested in pursuing a short sale be sure to find an agent who has closed at least 100 short sales.
Have you ever done a short sale? If you have, share your experience with us.