The real estate short sale, what is it, why would a home seller want to do this, why do the banks agree to this, and is it worth your while to try to purchase a home this way?
A real estate short sale is when someone wishes to sell their home but more the mortgage balances are higher than the amount one could reasonably expect the home would sell for. This can happen for many reasons including a fall in home values in an area. Generally speaking a home seller who wishes to pursue this course of action will only have one other option which is to allow the home to be foreclosed on, which is not a nice option at all.
Banks generally will agree to a short sale if the home owner can show hardship and is behind in their mortgage payments. The home owner will also have to show that they do not have the income to pay off the mortgage or begin making full payments. Why will banks generally agree to allow short sales? Because they know that in many cases it is much cheaper for them than to have to foreclose on the home and then try to sell it later. Foreclosed homes generally lose value fairly fast once they are empty as they fall apart from neglect.
Is a real estate short sale worth pursuing as a home buyer? That really depends on your situation. Do you need to find a home and move into it within the next 3 to 4 months? Then the answer is that a real estate short sale is not for you. Real estate short sale offers generally take 8 to 20 weeks to get approved or countered by the bank. Once you have gotten that approval generally you have another 30 to 60 days to actually get to your closing. This can mean you are closing 4 to 8 months after you first wrote an offer on the home.
Another consideration when considering the real estate short sale is the current home owner. Generally speaking you are dealing with a person or people who are in financial trouble. They cannot afford to maintain the home. You are likely to have a considerable amount of deferred maintenance to deal with. Some of this maintenance which has been deferred likely will have caused other issues which would not have come up if the maintenance had been done in the first place.
In conclusion, you sure can get a great deal purchasing a real estate short sale, you just need to do all your homework and fully understand what you are getting into. A good experienced REALTOR will be of great value to you from the start of this process all the way to the closing table.
Written by James Boyer REALTOR, working with home buyers and sellers from the Chatham New Jersey Real Estate market out to the Morristown New Jersey Real Estate market and even over to the Maplewood New Jersey Real Estate market. If you are thinking of moving to New Jersey, I would strongly recommend these towns and others along the Midtown Direct train line into Manhattan.