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What is a Short Sale?
When the balance of a mortgage is more than the current market value of the house, the seller may negotiate a sale price that is fair market value and submit the offer to the mortgage holder for approval. When the bank agrees to take an amount that is less than the mortgage balance this is called a ‘short payoff’ or a ‘short sale’.
Why are there so many listings in a short sale position?
2005 and 2006 brought record high sale prices. Owners who bought at this time paid much more than homes are currently worth. Those who bought with 90-100% financing are all in positions of negative equity also known as ‘being underwater’. Many homeowners used the attractive financing products available at this time like 3/1 arm and 5/1 arm loans- these people expected to sell or refinance before their adjustment occurred. With prices on the decline, selling or refinancing is not possible without bringing large amounts of money to the table. These homeowners are now working on doing short sales.
Can anyone buy a Short Sale?
Yes- A short sale can be an opportunity to get a home at an aggressive market value. The most important thing to know before getting into a short sale is that the length of time to get a response to your offer may be several months. It may be several more months before all parties are ready to close. The bank is not obligated to meet any time frames on a contract presented to them. So while anyone can buy a short sale- you have to be ready for a long haul and be very patient. A short sale buyer can use cash or get financing.
Can any seller do a short sale?
Before advertising a short sale, the homeowner must be sure that the bank holding the mortgage is willing to consider a short sale. Not all lenders will do them. There are different requirements for the homeowner. The 3 main reasons a bank will consider a short sale are- loss of income, medical problems, and divorce. Something has had to occur since the seller qualified for the mortgage to show why they can no longer make the payment.