We have been hearing a lot about short sales lately. For prospective home buyers, a short sale can be a real bargain and get them into a house and a neighborhood that they might not otherwise been able to afford.
But what exactly is short sale, and what can you expect if you are interested in buying a home this way? Here is some useful information all about buying a home through a short sale.
So what exactly is a short sale? A short sale occurs when a home seller agrees to sell his or her home to a buyer for less than the amount that is remaining on the mortgage. When the home sells, the owner will be “short” in the money needed the pay back the mortgage in full.
When the sale closes, the owner either needs to bring cash to make up the difference in the cost, or the mortgage holder needs to forgive the balance and accept less for the mortgage pay off. The mortgage holder has to release the lien on the property.
Since the owner doesn’t usually walk away from the sale with any money at all, he or she is usually not that concerned with price, if the mortgage holder agrees to accept less than is owned. The house has to appraise for at least the cost of the purchase price.
Where it gets tricky is in all of the negotiating with the mortgage holder and getting them to approve the short sale. Waiting for lender approval can take some time, so a buyer interested in a short sale home must be willing to wait and wait, months at a time. The average wait time is three to five months, although it could take longer.
Because of this waiting, short sale buyers should insert a clause into their offer stating that all of the deadlines they need to make (such as getting approval for their on mortgage, getting the appraisal done, etc. ) will be postponed until the sellers get all of their short sale approvals in writing.