Purchasing a home in Council Bluffs at a discounted price can be appealing, but it’s important to consider the potential complexities and risks involved. One option is to buy a property through a short sale, where the home is sold for less than the outstanding debt.
Homeowners facing financial difficulties can initiate the short sale process with their lender to avoid foreclosure. Lenders may approve a short sale if the home’s value is lower than the debt and the seller can demonstrate financial hardship. While short sales were common after the 2008 recession, their prevalence has since decreased.
Short Sale vs. a Foreclosure
Buyers sometimes confuse short sales and foreclosures, but they’re different. In a foreclosure, the bank takes back the property and sells it for less than its value. Both situations result in the homeowner losing the property due to financial difficulties, but the details vary.
In a short sale, the seller chooses to go through the process, while a foreclosure is involuntary. Foreclosures are worse for the seller’s credit history and may lead to bankruptcy.
What Are the Benefits of a Short Sale?
Buyers can enjoy several key advantages when purchasing a property through a short sale. First, the price is typically lower as lenders are highly motivated to sell and minimize their losses. Additionally, short sales tend to be less complex than traditional sales, with reduced competition from other buyers. This increases the likelihood of your offer being approved.
The advantages of a short sale for sellers include foreclosure prevention and potential debt forgiveness. Sellers who undergo a short sale may be eligible for a new mortgage within two years, whereas obtaining another mortgage after a foreclosure is significantly more challenging.
Are There Downsides of a Short Sale?
Buyers may find short sales to be time-consuming compared to traditional transactions. These transactions often take longer to complete, and there is an increased level of risk since the home is sold as-is. There is also the possibility that the transaction may not go through, resulting in wasted time for the buyer. Additionally, homes involved in short sales may be in significantly worse condition due to the owners’ financial hardship.
For sellers, there are several pitfalls to consider. Sellers have no power to negotiate the price, as only the lender can do so. Furthermore, sellers will not receive any profits from the sale, as the proceeds go to the lender. Short sales can also negatively impact the owner’s credit scores.
Short Sale Tips
If you are aware of the potential risks and still intend to pursue a short sale property, it is crucial to be adequately prepared. Despite the property being sold as-is, it is advisable to conduct an inspection to determine the extent of necessary repairs and associated costs. Additionally, providing evidence of substantial repairs needed will enhance your negotiating leverage with the lender.
Although short sales can get you a good deal, be realistic with your offer. If it’s too low, it might get rejected.
It’s also smart to bring as much cash as possible to reduce the lender’s risk.
Lastly, work with an experienced real estate agent like Rob Washburn for short sales, as they’re complex transactions.
