While many of us dream and plan of buying a house, most of us are unaware of the jargons used by realtors whenever they present options to us. It is natural to find it difficult to understand some of the terms and conditions of these auctioned properties especially by the bank. One of the most misinterpreted real estate terms is short sales.
If you are eyeing houses and properties sold by banks or loan companies, you have probably heard about short sales. A house for short sale is a property that is sold less than the amount owed by the homeowner. Once sold, it frees the homeowner from his debts and obligations without having to file for bankruptcy or go through foreclosure process.
Benefits of a short sale
House for short sale enables a homeowner to sell a property for less than the total amount of their debt from a lender. A home is qualified for short sale only if the debt of the homeowner costs more than what his property own. The bank or lender agrees to this condition only if the borrower has proven his inability to pay his debt in full.
At first, it seems like the borrower is the only one who gains benefit from this transaction. Actually, a short sale is beneficial to all the parties involved. Definitely, putting his house for short sale is a brilliant move to relieve him of his problems. He was able to find a profitable solution to his lender’s concerns regarding his unpaid debt. The borrower or homeowner is also able to save their credit, regain dignity and have peace of mind.
Most of us do not realize this but the lender benefits off house for short sale as well. A short sale can cost the lender or the bank less compared to foreclosure. It provides a hedge against future price declines in the market. A short sale is also a quick way to raise capital. Foreclosures could take at least a year or more. Lenders believe that short sales guarantee a loss now. This is preferred more by lenders compared to a possible future loss, which may possibly be much larger than what they could lose today.
House for short sale allows the home buyer to buy a more affordable home. It is the ultimate American dream to have your own home. This is the chance for those who have limited budget to obtain an affordable homeownership. The same principle applies to the investor buyer who looks for discounted properties to be able to make substantial profits.
As for the realtors, a house for short sale is an opportunity for them to earn decent commissions for helping a struggling homeowner. A short sale is also the best option for continued real estate sales in spite the recession or a down economy. In most down markets, many choose to go with short sale to relieve debts and avoid foreclosure.
Certainly, there are different ways you can benefit from a house for short sale. Whether you are the lender, borrower or home buyer, this type of sale will give you an advantage especially in these economic times.