What Are The Risks Of A Short Sale? - Fixanswer

A short sale is when a home owner sells his or her property for less than the amount owed on their mortgage . ... Typically, the bank or lender agrees to a short sale in order to recoup a portion of the mortgage loan owed to them. Short sales are becoming increasingly rare as the economy improves.

Why is a short sale bad?

If you’re a seller, a short sale is likely to damage your credit — but not as badly as a foreclosure. You’ll also walk away from your home without a penny from the deal, making it difficult for you to find another place to live. However, a short sale can forestall foreclosure and its negative impact on your credit.

What is the downside of a short sale on a home?

Disadvantages of a Short Sale

A short sale comes with quite a few catches. There are more parties involved than a typical sale making the process complicated and often lengthy. In a traditional home sale, price negotiations happen between the buyer and seller (or their representatives), not the seller’s bank.

Is buying a house on short sale a good idea?

In short, short sales are a good idea if you have plenty of time and money . A short sale buyer may get the property at a reduced price, but the property (in all likelihood) has its share of problems — think “fixer-upper” — and the deal needs to go through considerable red tape to make it happen.

What happens if a short sale does not sell?

Unfortunately, if your attempts at short selling your home fail you’re left with a home you’re struggling to afford and no way to sell it. When short sales don’t pan out, homeowners still have foreclosure avoidance options, including deeds-in-lieu of foreclosure .

What can stop a short sale?

Foreclosure stops the short sale process because the bank takes ownership of the home; it’s no longer yours to sell. This happens if you can’t make your mortgage payments during the short sale process.

Do you still owe money after a short sale?

In California, you can only do so after a short sale , but remain liable for the debts after a foreclosure sale. ... Thus, deficiency judgments, or these debts you may still owe after your home was sold, can usually be discharged in bankruptcy.

How does a short sale affect the buyer?

Short Sales Don’t Mean a Discount

They might give out a loan that is too much for the buyers to handle. When the market finally drops, the owner is left with little equity and a mortgage that a sale will not pay off. Buyers end up owing more on the home than it is worth .

What happens after a short sale is approved by the bank?

After accepting an offer, the homeowner or his realtor must forward the offer to the lender for review . If the lender approves the offer, the short sale moves forward. If the lender does not accept the offer, the buyer may counteroffer or end the process.

Who pays closing costs in a short sale?

These seller closing costs include things like property transfer fees, realtor commissions and attorney or title company fees. In a short sale transaction on the other hand, the seller’s closing costs are usually paid out of the money the buyer brings to the closing.

Why are foreclosures cash only?

Buying your foreclosed property with cash: A cash purchase means you won’t have monthly loan payments , and will avoid the interest expense and closing costs involved with financing. You may be able to negotiate a faster closing on your home because you can eliminate the additional time involved in obtaining financing.

How fast can a short sale close?

Mortgage lenders prefer to close short sales within 30 days or less after approving buyer offers. In fact, lenders often push for closing short sales within two to three weeks of sale approval.

How long does a short sale take 2020?

Short sales usually take longer than regular home sales. It’s rare for a short sale to close within 30 days . If you want to sell your home as a short sale, you’ll need a good Realtor to help keep the new buyer motivated so they don’t want to give up on the home due to a lengthy sales process.

Why do banks prefer foreclosure to short sale?

Why Banks Would Prefer a Short Sale Over Foreclosure

If it costs more to foreclose over agreeing to a short sale , the bank is very likely to favor the short sale. ... If a bank receives an offer that is close to market value, it may be more likely to accept that offer instead of foreclosing.

How can I speed up a short sale?

Speed up your short sale closing date by making your offer as free of contingencies as possible. Submit your mortgage approval with the offer . Contribute a substantial deposit to show your good intentions.