What does a short sale mean in real estate?
What does a short sale mean in real estate?
A short sale in real estate is when a financially distressed homeowner sells their property for less than the amount due on the mortgage. The buyer of the property is a third party (not the bank), and all proceeds from the sale go to the lender.
Does Realtor get commission on short sale?
While a seller typically pays all real estate agent commissions and other closing costs, in a short sale the seller pays nothing; the lender or bank foots the bill.
How does a short sale affect the seller?
The biggest risks of a short sale for sellers are that you may not find a buyer or that you won’t get approval from your bank or mortgage lender. If this occurs, you may not be able to avoid foreclosure.
Do you still owe money after a short sale?
After the short sale is completed, your lender might call you or send letters stating that you still owe money. These letters could come from an attorney’s office or a collection agency, and will demand that you pay off the deficiency. Your lender or the collector might even try to intimidate you into making payments.
Why would a short sale be denied?
A short sale is sometimes denied due to something as simple as the seller being current on paying their mortgage. The bank’s guidelines might state the bank isn’t allowed to approve a short sale if the mortgage payments aren’t in arrears.
Why do banks prefer foreclosure to short sale?
Banks are run like a business because they are a business looking to earn a profit. If it costs more to foreclose over agreeing to a short sale, the bank is very likely to favor the short sale. With foreclosure, a bank takes possession of the house, then resells it at a mortgage auction to the highest bidder.
How long does it take for a bank to approve a short sale?
about 60 to 90 days
What happens if a short sale doesn’t sell?
Unfortunately, if your attempts at short selling your home fail you’re left with a home you’re struggling to afford and no way to sell it. When short sales don’t pan out, homeowners still have foreclosure avoidance options, including deeds-in-lieu of foreclosure.
Can you negotiate short sale price?
It is entirely possible to negotiate a short sale, but doing so can be a time-consuming process. Instead of negotiating with the seller alone, as is the case with most traditional sales, short sale negotiations must be approved by the lender, too.
Is a short sale good for a buyer?
Short sales are a mixed bag for the buyer, the seller and the lender. If you’re a seller, a short sale is likely to damage your credit — but not as badly as a foreclosure. In a short sale, the proceeds from the transaction are less than the amount the seller needs to pay the mortgage debt and the costs of selling.
Who benefits from a short sale?
For the seller, a short sale presents less damage to his credit report than a foreclosure, and allows him to recover and buy a new house more quickly. This sense of cooperation between the seller and buyer may facilitate the exchange and get the new owner into the house more quickly.
What are the cons of a short sale?
The cons of buying a short saleThe process can be long and frustrating. Despite their name, short sales are usually not short. Sometimes it’s not worth the wait. Just because a home is a short sale doesn’t mean the asking price is a fantastic deal. The home may require costly repairs.
What are the risks of buying a short sale home?
Learn seven risks of a short sale so you can plan properly and decide if it could be the right investment for you.Long Process. Subject to the Mortgage Lender’s Approval. Lender Could Counter, Reject or Not Respond. Opportunity Cost. Property ‘As Is’ Is the Seller Approved? Lenders Prefer All Cash or Large Down Payments.
How much are closing costs on a short sale?
Buyers usually pay between 2% and 5% of the mortgage amount in closing costs. Lender and broker fees as well as third-party fees make up the lion’s share of closing costs.
Who pays the real estate agent in a short sale?
The buyer actually pays for all the commission fees — both for their own agent and the seller’s agent — as these fees are worked in the home’s total purchase price.
Who pays for short sale negotiation fee?
And while banks are reluctant to pay those fees, most sellers cannot afford the fees. So it is becoming increasingly common for the buyer to pay the fee for the 3rd party negotiator. In any case, a seller typically cannot receive any proceeds from a short sale.
What are the pros and cons of a short sale?
The Pros and Cons of Buying a Short SaleShort sales can take a long time. They are sold as-is. Make sure the lower price is really worth it. The good deal factor can be influenced by the market conditions. Less competition. Don’t overlook needed repairs. Home inspections are a must. Research the community, get neighbors’ opinions if possible.
Does a short sale ruin your credit?
The term “short sale” does not appear in a credit report. When you negotiate a short sale, the lender is agreeing to accept less than the full amount owed on the mortgage, and will likely report the account as settled for less than the full balance. With time, the negative impact on your credit scores will decrease.
Why does a short sale take long to close?
Short sales happen because the loan on the property is larger than the sale price minus all the sale expenses. With a short sale, the seller is asking the bank to take less than the amount owed. The seller’s bank must approve the sale, and this is where the big delays can happen.
