What Is A Short Sale?
A short sale is a selling option for a homeowner that owes more on the house than what it is worth. Generally, the proceeds of the sale go directly to the lender and it is up to them whether they pursue the borrower for the amount they lost.
The short sale is a good option for both the seller and the lender because it helps avoid foreclosure. The bank will save both time and money by not having to go through a foreclosure. The homeowner will avoid a foreclosure which could have a massive effect on their financial life. Read our article here about how a foreclosure can affect someone.
How a Short Sale Works
A short sale usually begins when a homeowner is falling behind on payments on a home that is worth less than what the mortgage balance is.
The first step in the process would be to reach out and get in touch with whoever makes the decisions at the bank. When speaking with them, it is important to find out if a short sale is something they would consider. Second, the lender must approve the request for a short sale. It is not required by law for them to do so, they do have the right to say no and proceed with a traditional foreclosure.
If the lender approves a short sale, the homeowner needs to take action to find a buyer. The quickest option would be to call FL Home Buyers. We buy houses and are ready to close immediately. We have been through this before and we have helped countless homeowners through this process. Another option would be to work with a real estate agent and handle the showings, inspections, and negotiations that come along with a retail buyer.
When the homeowner accepts an offer and has a signed contract, they would submit it to the bank. It is now up to the bank to decide whether or not to accept the offer. This is usually the part of a short sale that takes the most amount of time.
Short Sales and Other Options for Home Sellers
Homeowners who fall behind on their mortgage payments may think they have no other option but foreclosure. A foreclosure devastates the credit rating of the people who lose their homes. The loss can also harm neighborhoods as it leaves homes vacant for months or longer while the mortgage lender works through the legal process. Other options often benefit many homeowners.
Risks of Home Foreclosure
The loss of the home may seem overwhelming to a family, but it can become more upsetting when they discover the lender still wants to collect money even after they take the house. The problem can arise when the outstanding loan is more than the value of the home. The mortgage company may attempt to collect the difference between what they get from a foreclosure sale and the balance of the loan. Even if an overpriced mortgage were the only financial problem the owner experienced, the demand to pay the balance could force people into bankruptcy court.
Concerns with Short Sales
Short sales offer an option that can help the homeowner as well as the lender. Short sales occur when a lender agrees to allow a sale of a home for less than the outstanding balance on the loan. The homeowner has a greater number of potential buyers, and the house will stay occupied.
A short sale can only take place with the approval of the lender, but many are willing to allow the process. The sale benefits many lenders as much as the home seller because they receive more money than they often would through a foreclosure. The lender also does not become responsible for the care of the vacant home. Vacant properties require lenders to cover maintenance, insurance, and property taxes. The companies must also actively seek out new buyers for the property.
Lenders may demand the remainder of the debt for a short sale too unless the homeowner gains their approval of the deal before it happens. Always discuss the situation with the lender before accepting any offers from a buyer. Get their agreement to the deal in writing to protect against any future losses after a home sale.
Possibility of Legal Action
Homeowners have fallen victim to predatory lenders over the last few years. In this situation, the buyers often have mortgages that remain underwater for decades when neighborhood values crash. Some experience higher interest rates and fees that make it impossible to catch up on delinquent payments. In some instances, lenders have given borrowers loan approvals they did not qualify for or financed homes for much more than they were ever worth.
Understandably, many homeowners hope to save a home through a lawsuit over a predatory lending deal. The length of time to get a case built and make it to court makes this an unlikely solution. Unfairly treated homebuyers can continue to pursue a claim, but a solution about what to do with their home must happen first.
Benefits of Cash Home Buyers
Cash home buyers offer a simple option that many people forget. A cash transaction allows the process to work faster because the buyer and seller do not need to wait for a lender to approve the loan or set a closing date. A cash home buyer can include individual purchasers, or it can be a company like FL Home Buyers. Through our process, we buy houses with fair market rates without all the lengthy negotiations, home inspections, and other details that can slow down the deal. The option works well for people who have limited time due to past due mortgage payments on their loans.
No Damage to Credit
Homeowners that decide to try a short sale will salvage their credit some compared to the effect of losing the home entirely to the lender. Short sales still lower credit ratings because the lender does not see the full payment for the loan. Sellers that work with FL Home Buyers can often avoid this credit risk because they can often get more for their home than they would with a pre-planned short sale.
Return to Normal
We buy houses through our financial lending service, so the homeowner gets a fair price. As a cash home buyer, we can complete our deals in as little as 30 days. The fast sales allow people to move on from a negative situation and begin rebuilding their credit and their life faster than they would with any other option.
Many people discover their credit remains good after a short sale, but even more so when they work with a cash buyer. The protection of their credit allows many to buy a more affordable home in a couple of years when they have a down payment. It is much more advantageous than a wait of 7-10 years after a bankruptcy.
Protection of Property
The emotional loss of a home becomes more heart wrenching when a beloved home sits vacant. Many houses left abandoned for financial reasons become damaged by the lack of maintenance and their vulnerability to vandals. Homeowners that fell in love with a house enough to invest years of work into their mortgage payments will feel slightly better when they know FL home buyers have the perfect new owner in mind.
Improvement in Experience
Loss of a home to bankruptcy causes embarrassment, but a short sale or cash sale is a common life change. People sell homes all the time. It is a situation that makes people feel more comfortable with their choices. People that seek out cash home buyers or pursue the potential for a short sale are addressing a problem and finding a solution rather than walking away from their debt.
We buy houses through an active search for distressed properties and sellers who do not want to wait. We know that these transactions happen faster and with fewer issues than traditional real estate deals. Home buyers benefit from the process because they get great homes at reasonable prices, and homeowners succeed in their desire to quickly sell an unwanted home or one they can no longer care for as they had planned. The options of foreclosure, short sales, and cash buyer programs may not suit the needs of every home seller. However, it is beneficial for all homeowners to have a complete awareness of the variety of possibilities available to them when they need or want to sell.