What Precisely Is A Short Sale All About?
If you have been following the real estate market even from a marginal level it’s possible you have heard the term “short sale” discussed time and time again. Short sales have existed in the real estate and mortgage world for a long while but they are occurring with an incredible amount of frequency nowadays.
So , what precisely is a short sale and why are they increasingly popular?
A short sale is a comparatively straightforward idea. A bank will accept a payoff on a mortgage that does not cover the leftover unpaid balance on the loan.
This can seem preposterous on the surface. Why would the lender accept a short sale? Basically, the reason explaining why the mortgage company would enter into short selling is to avoid foreclosure. In contrast to what many are convinced a bank can lose significantly on the process of taking part in foreclosure. With a foreclosure the bank would have to take ownership of the property and then sell it. A short sale will also lead directly to money losses. Nobody would deny that. However , the losses would be less than what’s the case when a short sale is engaged in.
Considering the plain fact the economy has boosted the number of repossessions to record levels it should come as no surprise that the quantity of short sales have increased also.
This is not to make it sound as if a borrower can simply set up a short sale on an impulse. Neither is it to say the bank will accept a short sale even if the borrower is in arrears on mortgage payments. More than likely the borrower must be in serious financial trouble for the mortgage company to even consider short selling. Additionally, you likely would be automatically denied this option if you have another property. The reason explaining why the mortgage company might be quite hard edged in this regard is to stop abuse of the short sale option.
Also, taking part in a short sale does not mean the borrower can “get a discount” on their mortgage. Here is some unfortunate news for those wishing to short sell their home: if you take part in a short sale you have got to put the home on the open market. To paraphrase the bank will accept a short sale on the home from a new buyer only.
There also are banks that set up short sale divisions where potential purchasers may call and inquire about any properties that have entered into an initial short sale agreement. Such divisions are set up to to aid the short sale process and get the house off the market as fast as possible.
At their core short sales are actually beneficial to both borrower and bank alike. For those that qualify for a short sale this is going to be the most suitable option to explore.