As a home buyer, there are many things that you can learn that will help the homebuying process. There are a lot of terms that real estate professionals use that the average buyer might not understand. One such term is a Short Sale. When looking for a home you might see that the home is a short sale or that an offer needs bank approval. What this means is that the seller owes more to the bank than they can sell the home for. For example, Mr. Seller bought a home two years ago for $250,000 and had an interest only loan. Mr. Seller also put zero money down. This type of loan was very common two years ago, but virtually impossible to get right now. So after two years Mr. Seller still owes $250,000. Now today, especially with a soft market, Mr. Seller might not be able to sell his home for $250,000. He also needs to pay agent costs and also closing costs. Somtimes the difference between what they owe and what they can sell it for is a little, somtimes it is a lot. Mr. Seller also can no longer afford the payments anymore so he stops paying his mortgage.
The bank has two choices. To forclose on the home which takes a lot of time and costs money, or just agree with the seller to take less than what they owe. Short sales can get the home sold quicker and save the bank money and the hassle of trying to resell the home themselves.
The short sale process can take a while. If you are a buyer that wants an answer the next day to see if your offer has been accepted, short sales are not for you. If you are a buyer that can wait and wants to get a good deal, hop on the short sale train and get on for the ride. It could take up to a month to find out if your offer has been accepted. There will probably be multiple offers on the property. These homes are usually priced for a quick sale and to get multiple offers. Dealing with the bank can be stressful, but if you can make it through the process and you can buy a home that was a short sale you will probably get a great deal.