by Winnie Saunders
As the number of home foreclosures hits new records every month, and millions of homeowners owe more than their homes are worth, banks and mortgage services are beginning to learn that working with a homeowner in trouble is less expensive than going through a foreclosure!.
When more money is owed on a home than the home could possibly appraise for, a foreclosing lender stands to lose a huge amount of money in lost equity and costs of foreclosure and home maintenance. When this happens, writing off a portion of the mortgage amountbegins to make more sense to the lender than going through the entire foreclosure process. Selling a home for less than the amount owed on the mortgage in these situations is called a “short sale”.
A huge percentage of aspiring homeowners today immediately start searching for foreclosed homes to buy. Buying a foreclosure can be a very successful strategy if you can find the right home. However there are many great values on the real estate market which aren’t owned by the lender. Short sales offer a number of advantages overforeclosure homes for some buyers.
When a home is foreclosed on, the owner has often gone through an extended period of financial difficulty. As a result, the owner has been unable to pay for the maintenance required to keep a home in good shape. As a result, foreclosure homes are often in need of many thousands of dollars in repairs. In a short sale situation, the owners often just need to move.
Maybe there was a job transfer or a divorce or any number of similar situations which cause the owner to have to sell before real estate values recover. These homes are usually in great shape and need no repairs. A buyer can afford to pay a little more for these because there won’t be a need to spend unknown amounts of money getting the home into shape to move into.
In addition, even though there are many more short sale situations than foreclosure homes, they are more difficult to find. Therefore, competition to buy them isn’t as great. You don’t find yourself in line behind 4 other offers or caught up in a bidding situation.
On the other hand, a short sale is one of the most difficult real estate transactions to negotiate. It isn’t amateur hour at the negotiation table. Yet because of the huge need for it, a growing number of real estate agents have become expert at the tough negotiations necessary in order to work out a short sale. These agents specialize in short sales and are often able to work out tremendous deals with lenders to sell these homes.
Purchasing a home using the short sale process can be a way to get a really good deal on a great home. The best way to be successful at it is to hire a professional buyer’s agent who specializes in short sales and knows who to contact to get the transaction successfully closed. This is a more trouble than your average real estate transaction, but very often worth it.