What is a short sale in real estate?

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Dealing with real estate short sale and want to know how to best handle it? Then its time you had access to all the important points pertaining to such as sale. The points we have listed below importantly delve into when a short sale takes place and how it is different from a foreclosure. Also we look into the many benefits that a short sale provides for homeowners and lenders compared to a foreclosure. With the aid of the points mentioned below,a homeowner can get the most from a short sale and even keep it from damaging their credit score.

The meaning of a real estate short sale

In the real estate market when the owner is in financial distress and they cannot hope to catch up with mortgage payments that are pending, and those that will arise in future they opt for a short sale. Importantly, during a short sale the property is sold for an amount that is less than what is due on the mortgage loan. The proceeds from the property’s sale go fully to the lender. The lender can then choose to file a lawsuit and get the borrower to pay the difference between the mortgage loan amount and the short sale amount, or they forgive the payment. A lender additionally has to provide an approval for a short sale without which it cannot go ahead, and as a result the process surrounding it can be long drawn.

Difference between a foreclosure and short sale

Usually a short sale process is started by the homeowner when the amount due to the lender is more than the actual worth of the property, and mortgage payments cannot be met. As part of the process the buyer and the homeowner finalize the details of the sale and the lender gets the money.

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As part of foreclosure, proceedings are started by the lender when the homeowner cannot make mortgage payments. With foreclosure proceedings enforced on a homeowner, they have to vacate the property and their credit score is adversely impacted.

Benefits and drawbacks of a short sale

One of the main benefits of a short sale is that it helps avoid a foreclosure which is often a costlier process for a lender. Additionally a real estate short sale does not cause the homeowner’s credit score to fall very much, especially if no deficiency lawsuit is filed by the lender to recover the difference due to them.

A real estate short sale also helps the lender avoid lengthy litigation and they can recover a substantial portion that was provided as part of the mortgage loan. The lender during a short sale also recovers more money compared to an auction and can even avoid paying the high fees involved. A homeowner also benefits as they have to pay less legal fees.

One of the main drawbacks of a short sale is that the homeowner does not get any monetary benefit from selling their property. Also buyers might not want a home available on a short sale if the homeowner overpaid for it during purchase and its current value is much lower.

Finally in a housing marketplace where the values of homes are decreasing a short sale is preferred by lenders who want to quickly recover the money of the initial loan. Additionally homes that have a lot of repairs pending are ideal candidates for short sales and often are snapped up in the market.

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