Can the Short Sale Process Save Me Money?

Article Posted by Expert Author: Sam Stieler  on 09/23/2013

Pretty much everyone scouring the housing market wants to get the best deal on the best property possible. There are multiple strategies you can employ to end up on the right side of your home buying initiative but few of them are as promising as pursuing homes going through the short sale process.

What is a Short Sale?

A short sale occurs when the lender representing a home seller will accept a lower price in order for an existing mortgage to be released. But in reality, this isn’t always a discount. In reality the tag you can get on a property up for short sale is better thought of as a price adjustment. Lenders often short sale a property when they feel the property is valued incorrectly and they want to get out of the initial mortgage they attached to the property as that mortgage no longer applies to the property’s current worth.

As well, any buyer considering a short sale should be aware that, just because the lender wants out of the mortgage as quickly as possible, this doesn't necessarily mean that the buyer's offer will be accepted by the lender, even if it is accepted by the seller of the home.

The good news may be that a short sale doesn't always occur as a result of the seller being in default due to stoppage of mortgage payments. A lender can consider a short sale before the seller ever reaches default status. A seller can be current with their payments, but if the home's value has fallen and the seller is encumbered, a discounted price can bring a home's price more in line with market value.

Understanding how to cash in on the is a great way to save some money on your next home. In this particular economy, it is truly a buyers market out there, and there are spectacular deals to be had if you are willing to patiently move through a short sale scenario.

Can A Short Sale Get You A Good Deal?

Although going for a short sale has many advantages, it can also have its complications. A short sale home that is in pre-foreclosure, for example, can involve lots of red tape that can take 30 days or more to close. In fact, depending on the area where the short sale home is located, a buyer may end up waiting up to six months for closure.

One way to ensure you get the best deal on a short sale is to conduct thorough research. This can be done by checking public records of the home you are looking at. Your agent can find important information about the home your interested in, including who holds the title to the home, whether or not the foreclosure process has been started, and how much the current homeowner owes on their loan. All of this information is crucial to anyone considering the purchase of a short sale home, because it will provide the buyer with a guideline for how much of an offer to make.

Getting The Lender To Agree To A Short Sale

Most lenders won't be in agreement for a short sale unless the seller of the home is without equity, and/or they find themselves unable to pay the difference between the sale price and the amount of the existing loan. The seller of the home will need to provide some sort of documentation, such as a letter of hardship to their lender to prove that they are unable to continue meeting the financial obligations associated with the home.

The IOU Calculator provides consumers with great tips and ideas on how to capitalize on low interest rates and save money on their home loans.  We also take the mystery out of the jargon and help explain various types of loan configurations.

 


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