Fullerton, California homes for sale

What is a Short Sale?

Whether you are buying or selling a home, it is important to know the answer to this commonly asked question. Short sales can involve homes, condos and even vacant land. They often occur when a seller has difficulty making mortgage payments or owes more than the home is worth. This gives buyers the opportunity to acquire a home for a reduced rate.

The most important factor in determining whether a short sale is possible is whether or not the bank will grant the sale. Banks will need to approve short sales because when they approve one, they are agreeing to accept less than a full mortgage repayment. Frequently, banks will approve short sales in order to avoid a more costly foreclosure process. As a result, sellers have the ability to get out from under an underwater home, while buyers have the option of purchasing a home at a lower price.

Video clip on pricing a Short Sale

What follows is more information in case you are still asking yourself, “What is a short sale?” – or the related question, “Is a short sale right for me?”

What to Expect When Selling Via Short Sale

A bank will not easily grant a short sale if it can't prove that it will save money by avoiding a foreclosure. That means sellers must prove they are underwater or have a hardship of some type, and that they will not be able to make their mortgage payments in the near future (or are already defaulting). Hardships include unemployment, illness, job transfer, divorce and more. Other short sales, called strategic short sales, happen when an owner simply wants to walk away from a home in which he owes more than it is worth. However, the bank typically requires the owner to prove a hardship of some sort, and often, this includes writing a letter to the bank.

It takes an experienced real estate agent to put together a successful short sale package for the bank, which includes pricing the home so that potential buyers are interested and the bank doesn't feel it is losing too much money. All paperwork must be filed within certain deadlines as well, so it is wise to choose a real estate agent with short sale experience.

What to Expect When Buying Via Short Sale

Buying a short sale can be a complicated but rewarding process. In the end, the buyer ends up with a property at a discounted rate. However, the buyer can't just place an offer without first conducting a bit of research. This is where a real estate agent with experience in short sales comes in. Among other necessary steps, it’s important to look up public records and find out exactly what is owed to the lender before making an offer.

The buyer must also be qualified to buy the home. This includes having suitable credit, a job and possibly even some money to put down on the loan. The best way to approach a short sale is to first get a loan preapproval letter. The agent will walk the buyer through the process of filing paperwork, hiring a specialist to inspect the home and more. If any paperwork is incomplete or not filed in a timely manner, the bank can reject the short sale offer.

The Differences Between a Short Sale and Foreclosure

The question, "What is a short sale?" often goes hand-in-hand with "What is the difference between a short sale and a foreclosure?" In short sales, sellers retain most of the control. In foreclosures, sellers hand the home over to the bank and walk away. While asking the bank to grant short sale approval may be difficult, the seller gets to set the price, protect credit and move forward with the sale similar to any other home sale.

Also, sellers who haven't defaulted on their loans and aren't in debt to the bank after the short sale can purchase a new home immediately, whereas foreclosures will negatively affect credit ratings and may require sellers to rent for several years. Foreclosures can cause credit ratings to drop by more than 100 points, and the foreclosure remains on the credit score for seven years. While short sales will negatively affect credit as well, it is typically not as harmful as a foreclosure. Many financial experts will recommend that sellers pursue all short sale options in order to protect their credit ratings before embarking on foreclosure proceedings.

If you are thinking about buying or selling a home, give us a call at (714) 726-3166 or send us an email to explore your options and to find out when is the best time for you to make a move.

Contact Information

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Carol and Jim
Preferred Home Brokers
3230 E Imperial Hwy, Ste 125
Brea CA 92821

Carol & Jim Chamberlain 714-726-3166 or 714-726-3144                  "Yes, We Can Be In Two Places At Once!"                                              BRE Lic Numbers: 00912962, 01015143