You might have heard one or two things about a short sale in real estate. It may look like a hard concept, but it is just another term for a conditioned sale.
What is a short sale?
A short sale in real estate happens when a property owner needs to sell the property for less than the amount owed on the mortgages or liens. It occurs when the current fair market selling price is lower than the sum of the mortgages owed, but the seller must sell anyway.
It is a term coined to mean that the current seller is short of cash to repay the original mortgage that is currently outstanding and cannot receive an offer of a high enough price to cover it. Since the seller is short of money, he has to ask for help from the bank to recoup a portion of the loan.
Today, short sales rarely happen. They were prevalent during the Great Recession but not anymore. In the rare cases where one is necessary, the bank may take into account mitigating circumstances such as a death of the primary income-earner, or a homeowner subject to a health challenge.
Advantages of making a short sale in real estate
As gloomy as it sounds, short selling is not at all that bad. The following are some of the advantages that come with short selling: A short sale protects your credit score. Instead of the alternatives, foreclosure, and default, a short sale protects your credit score as it shows that you make financially sound decisions. Credit bureaus often frown upon a foreclosure, so it is better to make a short sale.
A short sale helps you avoid foreclosure. One of the worst things that one can do to a credit score is to add a foreclosure record on it. Hence, it is better to make a short sale as it deflects the adverse effects of having a mortgage foreclosed.
A short sale saves the seller from paying the fees that usually get paid by the seller. The charges get covered by the bank.
Disadvantages of making a short sale in real estate
There is one disadvantage to making a short sale in real estate, and that is the lack of cash received on the part of the seller. This one is a given since the quick sale is a Hail-Mary pass in an otherwise potential foreclosure on the property.
Final Tip
Sometimes you need to short sell your property because you need to move to another state or country and keeping another property is not practical. Hire a real estate agent, one specializing in short sales, today to help you with the transaction.
