Wednesday, October 10, 2007

So, What's a Short Sale?

In this changing real estate market, everyone is talking about "short sales," but the regular consumer might be left wondering what exactly a short sale is. While we Realtors know all about them, this is something every homebuyer on the market should be aware of. So, here is a quick introduction to the world of the short sale.

A short sale happens when a homeowner:
  • Can't make their mortgage payments
  • Is facing foreclosure
  • And the market value of the house is less than the loan amount
So, a short sale is basically selling the house for less than the amount owed on the house. This allows the homeowner to avoid foreclosure and make good on their loan obligation. It will affect the homeowners credit, but it is typically not as bad as having a foreclosure or bankruptcy on your record.

Of course, any short sale is subject to the approval of the lender. But, they will often approve the short sale because banks are not in the business of foreclosures. They do not want to take possession of the house and then have to sell it. They just want their money back.

Preparing for a short sale will require a lot of paperwork, communication and patience for all paperwork. It is not a typical real estate transaction, and the close of escrow can take longer than normal.

Short sales can be complicated, but smart buyers can find some good deals. Other sticky issues to be aware of concerning short sales are taxes, disclosures, the lender approval process, and more. If you have questions about short sales, just let me know. I'm always happy to help. I can be reached at 510-547-5970 x57 or MSmartt@jps.net.

1 comment:

Malana said...

Interesting to know.