Short sale implies when the someone sells their house for less than what it was valued at, usually, even less than what he owes to the lender. People usually sell their house on a short sale when they are in financial distress or cannot repay the mortgage. If you have a limited budget, buying a home on a short sale can be a good option for you. However, the short sale buying process is a bit complicated. Before investing in a short sale, you should know these facts about short sale.
5 Facts about Buying a Property on a Short Sale
1. Foreclosure and Short Sale are Different
If a person fails to pay the mortgages on time, the bank or lender will force the person to sell the house, and this called foreclosure. When you face foreclosure, your credit score will go down, and you’ll have a hard time getting a new loan from the bank in future. But the short sale is entirely different from the foreclosure.
When you short sale your house, it won’t impact your credit score. As a result, you can apply for another loan to purchase a new property.
2. Requires Approval from Multiple Parties
If you want to purchase a property on a short sale, you’ll require approval from the lender or bank. As the lender or bank get all the money for shortsale, which is way less than the actual market value, they tend to wait and sell the property to the highest bidder. As a result, the process becomes lengthy. Again, if there are multiple liens on the property, it can require more time. Generally, it takes months to close a short sale deal. However, if the lender isn’t experienced in short sales, it can take up to a year to close the deal.
3. You Will Face Some Serious Competition with All Cash Investors
Lenders or banks often want buyers who will purchase the house with all cash. While purchasing a home on a short sale, you’ll face some serious competition with investors that will purchase the property with all cash or a larger down payment. That’s why before buying a house on a short sale, make sure that you have sufficient cash to purchase the property at once.
4. Only a Few Buyers Can Actually Close the Deal
I am not discouraging you, but it’s a fact in the short sale. As you’ll have to wait for months to close a deal, many buyers give up and leave the deal. It’s estimated that three-fourth of the buyers who wanted to invest in a short sale cannot close the deal.The key to success in a short sale is determination and resistance to other investment temptations.
5. Difficult to Close the Deal without a Realtor
Purchasing a property on a short sale is different from regular buying and selling. It requires various paperwork and legal documentation. If you’re new to real estate or have limited knowledge about real estate, you should hire a realtor. An expert realtor will help you to close the deal smoothly.
