Short Sale 101: Everything You Need To Know In Making A Short Sale

Myrtle Beach Sold ShortWhen debt owed on a property exceeds its total cost, sellers usually have two options: making a short sale or having the house foreclosed. While most sellers will choose to walk away and leave the house for foreclosure, others will want to consider making a short sale.

Depending on the condition of the house and the debt owed, a short sale may be a better option than walking away. But, of course, there are also some risks to it. This article will talk about the basics of short sales including its advantages and disadvantages to both seller and buyer.

What’s in a Short Sale for the Seller?

To help you make a decision, listed below are the advantages and disadvantages of short sales.

Advantages:

  • Short sales are easy to close. It only takes a couple of months to complete one.
  • Missed payments are often avoided in a short sale.
  • Sellers who are divorced or have disability or disease automatically qualifies for a short sale. The qualification process is generally faster and simpler for these sellers or homeowners.
  • The house is sold as is in a short sale. Sellers are not strictly required to fix the house up or do some renovations.
  • Selling the house that has more debt will look better on the seller’s credit than leaving it for foreclosure.
  • Some sellers actually qualify for moving money worth $3,000 – $30,000 from their bank when they make a short sale.
  • There is no need to pay taxes on forgiven debt as a result of a short sale.
  • Depending on the negotiation with the bank and the buyer, the seller may not have to pay for the difference in the total sale price and the remaining debt on the house.
  • The seller can live in the house while the short sale process is ongoing, relieving him or her of potential rent payments.

Disadvantages:

  • This type of sale involves a tricky process so one may need to work with a highly skilled professional to ensure it will run smoothly.
  • If lenders have not waived deficiency rights, the bank may come after the seller after a short sale.
  • Some banks are uncooperative and may reject offers and/or necessary approvals.

There are lots of factors to consider when deciding making a short sale or simply leaving the house for foreclosure. But, for a seller’s best interest, professionals highly suggest considering all potential options first prior to walking away.

What’s in it for a buyer?

A short sale can also be beneficial to buyers. In fact, most buyers especially seasoned property investors and real estate entrepreneurs opt to choose short sales over traditional methods of buying houses.

Here are the advantages and disadvantages for buyers.

Advantages:

  • Short sales allow buyers to purchase property at 15% (or more depending on the negotiation with the seller) under standard market value.
  • Short sales do not require buyers to pay for earnest down payment even though they are still involved with the property.
  • Short sale is a great way for property investors to fill in the pipeline with several offers of inventory without having to close all at the same time.
  • In short sales, buyers have strong influence and may control total purchase price and worth negotiation.

Disadvantages:

  • Failure to work with a skilled listing agent may result to bad approvals and eventually foreclosure.
  • Because it’s a short sale some banks will require buyers to hold the property for 30-120 days after the sale prior to releasing approval – which may affect the buyer’s profit if he or she is planning to resell the property at once.
  • A house offered at short sale may be trashed by the seller. As a result, buyers will not be allowed to negotiate concessions or price drop with the bank.
  • Short sales are not the best option for buyers when considering buying houses at wholesale.

Short sales are indeed a great option for homeowners who have more debt on the house than what it’s worth. It has lots of advantages and benefits both to buyers and sellers and may be the best alternative to foreclosure.

On the other hand, to maximize these benefits and ensure that a short sale is a success, it is important to work with a highly skilled real estate professional. Also, it would help if both buyer and seller speak with a real estate attorney first to help clarify some important issues in the sale.

JP Short Sales Team
604 N. 27th Ave Myrtle Beach, SC 29577‎
843-839-9870
myrtlebeachshortsaleteam.com

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