What is a Short Sale?
Everybody loves a good deal. So when you’re house hunting and every penny counts, the low price of a short sale can be really tempting. But what exactly is a short sale? And is it always a great deal? Well, it all depends. So we're going to tell you a couple things about short sales and let you decide.
First, let's talk about what a short sale is. A “short sale” happens when the homeowner sells his/her house for less than the amount owed. Short sales typically happen more often when a market shifts and the home’s value falls. In this case, a short sale will appeal to a homeowner who wants to be rid of their house, even at a loss. It can also be a way a homeowner tries to avoid foreclosure. The homeowner, with a buyer who offers less than the amount owed, can approach the lender requesting they accept the short sale to avoid foreclosure proceedings. The lender must then give permission for the homeowner to proceed with the short sale.
So while that’s bad news for the lender and homeowner, it probably sounds like something that could be a great deal for the potential homebuyer, and some short sales are just that - great deals! But, if you’re new to this, be careful you don’t get carried away. The short sale process is not for the faint of heart! Read on below to find why.
- If you’re an inexperienced home buyer who thinks short sales are smokin’ deals in terms of lower prices, we urge you to put on the brakes. The reality is that most short sale deals go to professional investors who can negotiate hard, pay cash, close fast, renovate, then sell again for profit. They don’t usually favor the first-time homebuyer. Maybe that stinks, but we’d rather you hear it from us.
- Remember that a short sale home was, at some point, someone else’s headache. More often than not, these homes have often been neglected and some are in need of serious work! If you’re considering a short sale, you need to know what you’re walking into, so please, we beg you, do not skip your home inspection! And while you’re at it, it’s a good idea to ask your inspector for repair estimates when a problem is detected. As many homeowners know, home repair costs can catch you by surprise if you aren’t prepared. You may find out that “great deal” isn’t so great after all.
- The only thing “short” about a short sale is the amount of money. Getting to closing day can be, and usually is, a long, drawn-out process. You see, each short sale and the length of time for lender response depends on the the negotiator, the number of lienholders, and who the lienholders and mortgage insurer are. Every once and awhile, you’ll get lucky and everything will go according to plan within the 30-45 days expected for a normal closing. It does sometimes happen! However, more often, the short sale process takes many months of back and forth.
If you’re a buyer who is considering a short sale or even just has a few more questions about homebuying, give one of the BHURDinUtah agents a call. We love to share our experience and help you determine the best path towards homeownership.