Is a Short Sale Home a Good Option?

You have come across a home that you love; its in the right neighborhood, its the ideal size for your family, and has all the bells and whistles you were looking for in a home. The only problem is that its a short sale. This is a common thing within the housing market right now. Many homeowners are finding themselves upside down in their mortgage due to a job loss, aggressive borrowing against their home when credit was easier to obtain, or an unforeseen circumstance. These same homeowners are opting for a short sale option in order to avoid a possible foreclosure of their home. This is where it can get tricky for the individual looking to purchase the home. Lets first discuss what a short sale entails.

What is a short sale?

A short sale is the sale of a home in which the proceeds from selling the home/property will fall short of the amount of debt that is owed on the home/property. The property owner is not able to pay the remaining amount owed on the loan and the lien holder or bank will then release the loan by accepting a lesser amount of money than what is owed on the debt. For the lien holder or bank, this is an alternative option to a foreclosure where the bank is able to recoup some of the money on the loan as opposed to losing more more money on the loan to a foreclosure.

Are you a good candidate for a short sale?

Since the bank is losing some money on the short sale it can take several months for an approval. When it comes time to make the decision to purchase a short sale home you must have patience. Even after you have come to an agreement between the seller, the bank or banks involved must give the approval. When there is one mortgage with one lender the process can take about two months. When there is another mortgage on the home with a different lender the process can take four months or longer to approve the sale. You are a good candidate for a short sale if your finances are in order. Lenders like cash offers or a good sized down payments. If you can not pay all cash for the property it is important that you are well qualified and that all of your financing is in order. If you are pre-approved and have a nice size down payment, approval can happen fairly quickly and you will be viewed more favorable in the borrowing process. And lastly , if you don’t have any contingencies like needing to sell your current home or be in your new home within a certain amount of time, then a short sale would be a good option for you. If you are needing a home within a certain time a short sale might not be for you as the lenders and banks can take time to approve.

Short sales can be a great way to get you and your family into a beautiful, affordable home if you have everything lined up on your end and are prepared to wait a little longer for approval. Making sure that all these bases are covered will ensure that the process goes smoothly. Happy house hunting!