4 Reasons Not to Write Off a Short Sale Home
A short sale is a sale in which a lender decides to accept a discounted payoff in order to release an existing mortgage. Many people will tell you not to buy a short sale house, but there is actually a lot to recommend about these properties.
Short sales can bring home buyers a number of concrete benefits. If you’ve found the perfect house, but it’s a short sale, don’t write the property off. Here are five benefits of a short sale anyone looking for a home should consider.
1. Low Cost
Short sale prices are often much lower than the average house price in a given neighborhood; it’s a chance to move into a house you wouldn’t be able to otherwise afford.
Why? Well, the alternative to a short sale is usually a foreclosure. The lender must pay all costs associated with a foreclosure, including administrative ones, and that runs into money. To avoid sending the house into foreclosure–and therefore having to pay these expenses–many lenders will sell the house for under the value of the original loan, hence the low price.
Keep in mind, though, that many short sale homes will require some maintenance or renovation; you might have to put in more money than the sticker price.
2. The Seller’s Cooperation
The owners of homes under foreclosure can be understandably angry at leaving the property. The buyer may even have to take legal action to clear the property or may find it damaged when they move it.
These issues are less common with a short sale. A short sale will do less damage to the former homeowner’s credit score than a foreclosure, making it easier for them to recover financially and possibly a purchase a new home. A short sale often represents a common goal between buyer and seller, making the process smoother and quicker than a foreclosure.
3. Favorable Financial Terms
Even though a short sale means less money for the bank that granted the original loan, a short sale is usually the best financial option for the bank as well. Continuing to hold the property means not bringing in any return on their loans, and foreclosing on any property is expensive. Even after the foreclosure, there is no guarantee that the property will be sold quickly.
Rather than continuing to lose money, banks generally agree to a short sale and offer favorable terms to the buyer.
4. Quick Approval
A foreclosure can take a lot of time. First the bank must assess the property, its condition, the status of the old loan, and more. Once they’ve successfully gained control of the property and determined its value, the bank can put it up for sale again. But there’s no guarantee how long it will take to resell the home. The bank could be left with an unprofitable property for months.
In comparison to a foreclosure, a short sale takes a lot less time. A property that is on a short sale is ready to be sold immediately because the owner isn’t capable of paying back their debt. This makes the property available to be possessed as soon as possible by the buyer. The bank also benefits from this quick turnover; they recoup as much money as possible on their loan and don’t have to deal with the hassle finding a new buyer.
Many home buyers shy away from short sales because they’ve heard horror stories. Anyone looking at a short sale should proceed carefully but by no means rule out the option.