A short sale occurs when a lender permits the sale of a property for an amount that is less than a mortgage’s face value. A homeowner may request a short sale of his or her residence in the event of a financial hardship like a lost job or a major medical expense. This type of sale may also be the best course of action when a home’s value has fallen far below its purchase price.
Advantages of Short Sales
If you’re buying a house that’s being sold under short sale terms, you’ll benefit financially as you’re likely purchasing a residence that is worth more than the amount you’re paying. In many cases, the original homeowner also benefits since he or she is unloading a large debt. Banks also see short sales as advantageous because the selling option gives them a better return on the loans than foreclosures.
Disadvantages of Short Sales
Approval time for a short sale can be a major disadvantage since it generally takes a minimum of 30 to 45 business days to receive an approval from the home seller’s lender. Often, the lender receives multiple offers, which means you’ll wind up bidding for the property and may pay more than you expected.
Exercise Caution and Patience
If you’re considering buying a house that is being sold under short sale conditions, be cautious and patient. Bear in mind that many lenders refuse to sell a home for the sale price listed. Also, since there are more parties involved with a short sale, these types of negotiations are usually lengthy and tough to complete.