Real Estate Explained: What Are Short Sales?

The real estate market is quickly racing into a downward spiral. Many homeowners are being faced with higher interest rates, as they move further into their home loans. These interest rates are forcing more and more homes into foreclosure. With foreclosure comes the chance of a short sale. But, for the home buyer, what is a short sale, and how can they take advantage of it?

A short sale refers to the fact that a home is on the market for a price that is "short" of the entire loan value. This term can be deceiving, especially if the homeowner has taken out a second mortgage or refinanced the property. The price of the home will be set by the lender and not by the homeowner. The lender has the right to say no to an offer just because they want to. The lender is never required to accept any offer, even one that is exactly what the home is being advertised for. Home buyers will need to keep in mind that short sales are one of the hardest real estate deals to complete. Depending upon the lending institution, a homeowner that is pre-approved, has a loan commitment in hand and is offering the exact price advertised, may either close on the home in days or never get the deal done.

For homeowners who wish to try and take advantage of a short sale, there are a few things to keep on hand in order to make the process as smooth as possible.

The most important asset a homebuyer can have when trying to purchase a short sale home is a great real estate agent, that is versed in short sales. The real estate agent will be able to guide you through the process of short sales and help with all needed paperwork and forms required by banks.

In order to take advantage of a short sale, the homebuyer will need to be pre-approved for the loan amount. The bank can take or leave any offer you put on the table, they can even counter offer with a higher price. Having a pre-approval letter will ensure the bank you have the funding you are proposing, and increase the trust between the two parties.