The Process of Buying a Short Sale Home
By: Gloria S. Smith
A short sale can be described as a kind of ‘pre-foreclosure’ sale whereby a lender agrees to receive less than the outstanding loan amount in order to avoid the problems of foreclosure and everything it entails. Because of this, the outcome of short sales can produce a purchase price that is majorly discounted and which a purchaser could take advantage of, while also being an outcome that can benefit lenders and home owners as well.
The main difference between a short sale and other types of property acquisition is that there is specific time constraints involved, meaning that a sale must be negotiated before a certain date or the property ends up in foreclosure. These foreclosure proceedings normally follow a tight schedule, so a person interested in a short sale has to be able to identify a property that is suitable to them, make contact with the property owners, make an inspection of the property and then make an acceptable offer to both the lender and the owners, all within this specified time frame!
The main and most obvious benefit for a purchaser of a ‘short sale’ property is the price, which will be much less than the real market value and if they are confident enough in obtaining the property at a considerable discount, they are virtually guaranteed to lock in a profit which is relatively low-risk.
Nevertheless, securing a short sale also means convincing both the lender and the home owner to allow the purchase of the home and this is where the benefits of the impending deal needs to be stressed to them.
The home owner would benefit because by selling during the ‘pre-foreclosure’ phase of foreclosure proceedings would let them rescue their credit rating from taking a nosedive, which having their property foreclosed would entail. Even though a short sale will be logged in their credit history, the outcome would still be a great deal better than home foreclosure and their credit rating taking a battering.
In the meantime, if there is not much equity in the home, the lender will probably prefer a short sale. You could say that if a lender is unable to foreclose a property and sell it for as close to its retail value as possible, then they are much more liable to consent to a short sale. On top of this, lenders would normally wish to steer clear of any aggravation connected with foreclosing a property.
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