While it isn’t the most common real estate term, you may have heard of a short sale, especially when the real estate market is struggling. Short sales are not something you would normally pursue, but it is important to understand their role in selling a home and what they can do to help people who are struggling.
Defining a Short Sale
A short sale occurs when the homeowner is listing their home for less than what they owe on a mortgage. This usually occurs to help them avoid having their home seized as part of a foreclosure. It can also happen when the market is struggling and the homeowner simply wants to get rid of their property. Short sales often have to be approved by the mortgage lender before a homeowner can proceed, and this approval process can be complicated. The homeowner must justify the sale to the mortgage lender. This is not a process that should be entered into lightly.
Benefits of a Short Sale
The biggest benefit of a short sale is that the home is likely to sell very quickly. Even in a slow market, homes that are listed well below their value don’t tend to last very long. Short sales are often on a tight deadline, so the lower price allows the sellers some negotiating room to speed the process up. This is especially important when foreclosure is on the table. Sellers facing foreclosure usually have 90 days to sell their home before it is seized by the lender, so moving quickly is of the utmost importance.
Struggles with a Short Sale
Short sales may be helpful for getting out of a sticky situation, but that doesn’t mean the homeowner is free and clear just because the property sells. Because the sale of the home doesn’t cover the entire cost of the remaining mortgage, they may still end up on the hook for the rest of the money, depending on the amount left over and the decision of the lender. Even getting approval for a short sale can be a complex process that requires the homeowner to prove financial hardship. This process often involves attorneys, real estate agents, and financial advisors, which also costs money.
If you find yourself facing the necessity of a short sale, it can be beneficial to consider selling your home for cash instead. Cash home-buying companies will pay you a fair price that is likely to be much closer to or more than what you owe. They also don’t require you to prove financial hardship, don’t require expensive professionals, and move quickly. All in all, it is a much better option than dealing with a short sale.
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