Short Sales

Short sale? What is a short sale? People are wondering while in financial crisis, how can they avoid foreclosure. Well, some may consider a short sale. This article will give you a background on short sales, the process of short sales and their impact on the real estate market.

What is a short sale?
A short sale in real estate is a sale of a property in which the proceeds from the sale fall short of the balance of debts secured by liens against the property, and the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. This can occur when the property owner is facing financial difficulties and is unable to make their mortgage payments, and the lender agrees to a short sale rather than foreclosing on the property.

What are the steps of a short sale?

• The property owner contacts the lender to discuss a short sale and provide documentation of their financial hardship.
•  The lender evaluates the homeowner's financial situation and determines if they qualify for a short sale.
•  The lender assigns a short sale negotiator to work with the homeowner and any real estate agents involved in the sale.
•  The homeowner lists the property for sale and an offer is made by a buyer.
•  The short sale negotiator reviews the offer and any other documentation provided by the buyer, such as proof of funds or a pre-approval letter.
•  The lender reviews and approves the offer, and sets the terms of the short sale, such as the sale price and any contingencies.
•  The property is sold to the buyer and the proceeds are used to pay off the outstanding mortgage balance and any other liens on the property.
•  The lender releases the lien on the property, and the sale is completed.

 It's important to note that short sale process can vary depending on the lender and the specific details of the sale, and it may take several months to complete.

How do short sales impact the real estate market? 
In the short-term, short sales can help to reduce the number of foreclosures in a given area, which can help to stabilize home prices and prevent further declines in property values. Additionally, short sales can help to clear out inventory, which can help to improve market conditions for sellers and buyers alike.
 
In the long-term, however, short sales can have a negative impact on the market. For one, they can depress home prices by introducing a significant number of distressed properties into the market. Additionally, short sales can increase the number of "underwater" mortgages, which can make it difficult for homeowners to refinance their homes or sell them at a later date.
 
Moreover, short sales have a negative impact on homeowners' credit score and can limit their ability to purchase another property in the near future. This can also have an impact on the real estate market as it might limit the number of potential buyers.
 
Overall, short sales can be a useful tool for addressing the challenges posed by foreclosures and declining property values, but they can also have negative consequences for the overall health of the real estate market.

For more information on short sales, call us.