Many banks are still experiencing a large amount of seriously delinquent loans on their books and many are turning to short sales to dispose of properties as opposed to foreclosures. The reason being is that short sales are faster and less costly for lenders to dispose of delinquent loans.
What exactly is a Short Sale?
As defined by Wikipedia, a short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property and the property owner cannot afford to repay the liens’ full amounts, whereby the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency. Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties.
What does this mean for you if you are in the market for a new home?
This ramped up approach by the lenders will present more opportunities to purchase a home that may be an attractive sales offering for new buyers. Short sales homes most notably are available at or considerably below market prices.
RealtyTrac is predicting that 2012 will be a record year for short sales. “Short sales are growing and will grow explosively over the next year, ”said Charlie Engle, RealtyTrac’s director of business development.
If you purchase a home that is a Short Sale, how do you qualify for a purchase mortgage?
From a buyers perspective, there is no difference between purchasing a short sale home versus any other sales listing. You see a house you like, make an offer to purchase. Next, the lender will review the offer and either accept or deny your sales offer.
Purchasing a short sale home can sometimes take a little longer to purchase vs. a normal purchase. Basically there are a couple of reasons for time delays: 1. It takes time for the lender to approve your offer. Lenders are getting much better with this than in the past. 2. Clearing title may delay the settlement. Always hire a professional title settlement agent and be represented by an attorney at settlement. The title agent will perform a lien and title search to make sure you have a clear title and there are no liens against the property that will come back to haunt you after purchasing the home. We recommend you always purchase “Owners Title Insurance” when purchasing not only a short sale, but any property. Owners Title Insurance will provide you with the extra security necessary if someone knocks on your door and presents an unsatisfied lien on your new home.
There are opportunities abound for clients who are looking to purchase their primary residence, second home, or investment property, especially home that are considered short sales. Your timing could never be better and the window of opportunity is open! Look for 2012 and extending into 2013 to see more and more short sales hitting the real estate market.
If you want to talk to one of our mortgage consultants, please call (302) 266-9500 or simply click on the button below to fill out our online contact form.