What Is A Short Sale?

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A short sale occurs when a property is sold at a price lower than the amount the homeowner owes on the mortgage to avoid foreclosure. For the lender to consider a short sale, the homeowner must be so far behind on payments that there is no hope of catching up, and the housing market must have gone down so much that the house is worth less than the remaining balance on the mortgage.

Short Sale Green Road Sign on Dramatic Blue Sky with Clouds.

Unlike a foreclosure, in a short sale, the homeowner initiates the sale of their house. Buyers will negotiate with the sellers and it must be reviewed and approved by the lender. Just because a home is listed as a “short sell” doesn’t mean the lender is willing to take a beating and accept your offer even if the seller accepts the offer. Because everything is dependent on the lenders review and approval, the short sale process can be lengthy.

Benefits of s short sale:

·         Home seller – Avoids foreclosure and the many headaches that come with a foreclosure, allowing a graceful transition into more affordable housing.

·         Buyer – Purchases a property at a fair market value and avoids having to deal with the risks of buying a foreclosed property.

·         Seller’s mortgage lender – Mitigates its losses by avoiding the process of foreclosing and reselling the property.

Pitfalls of buying a short sale property:

·         Takes more time than a traditional purchase.

·         Buyer typically accepts the property “as is.”

·         The seller normally will have to pay money at closing or agree to an unsecured debt.

·         The approving lender will rarely agree to pay for any extras which may mean high closing costs for the buyer.

If you are considering purchasing a “short sale” home, be prepared for a lengthy, complicated process. Feel free to contact any of our agents.

Rodney McCoy | 601.383.1019 | rmccoy@rightsizerealty.com
Jamie McCoy | 601.259.0461 | jmccoy@rightsizerealty.com
Andrew Tyre | 601.842.4270 | atyre@rightsizerealty.com
Allen Wilson | 601.985.9231 | awilson@rightsizerealty.com

Paul Tyre | 601.709.9002 | ptyre@rightsizerealty.com

Dianne Nelson | 601.421.7094 | dnelson@rightsizerealty.com

References:

FreddieMac (2020). Buying a Short Sale Property. Retrieved from: http://www.freddiemac.com/purchasemarket/ssfaq.html#a1

Ramsey, D. (2020). What is a Short Sale? Retrieved from: https://www.daveramsey.com/blog/what-is-a-short-sale