Are Short Sales Homes Still Available?
Short sale homes are a vanishing species, and that’s good news for everyone. The change means that the real estate market is now doing much better in most areas. At the same time, there are still places where short sale properties are still available.
In basic terms, a “short sale” is a property the owner has to sell, but the value of the house is less than the mortgage balance. The seller can’t unload this home without bringing in cash to pay off the lender.
How To Buy A Short Sale Property
The alternative is a short sale. In this situation, the owner, or an attorney representing the owner, asks the lender to accept the fair market value of the property as payment-in-full for the mortgage debt.
Read: How To Buy A Short Sale Property And Save 10%
Historically, there was no chance that lenders would have accepted such a proposal. However, during the mortgage meltdown, short sales were common. In a market that was awful for lenders and homeowners, short sales were less awful than foreclosures.
Most of the time, the seller has filed paperwork with the lender, including a hardship letter explaining the necessity of the short sale. When you make an offer on a short sale property, make sure the lender has already agreed to accept the sales price as full payment.
The sellers are not likely to care about the price, since they won’t be receiving any of it. The lender is the one who will ultimately accept or reject your offer. Typical discounts in 2016 were ten percent off the appraised value.
However, with short sales becoming rarer, that percentage could drop in 2017.
Short Sale Advantages
Short sales offer several attractions:
First, these are owner-occupied houses, not abandoned properties. In most cases, that means the appliances work, utilities have been maintained, and vandals have stayed away.
Second, the properties are usually sold at discount. How much of a discount depends on the best offer that comes in. The lender will want to make sure that the discount is as small as possible so that it can limit losses.
Read: How To Buy A Home In 2017 After A Short Sale or Foreclosure
Third, the lender also wants to make sure that sale is an arms-length transaction, without any hidden benefit to the buyer or seller. This means making sure that you’re not selling the property below its value to a friend or relative.
Because the lender has to approve the transaction, no one should expect a quick settlement . And there’s no guarantee that the lender will say yes to a short sale offer.
Fourth, as part of the negotiations, sellers can sometimes get a commitment from the lender to give up any claims after the sale, such as seeking a deficiency judgment. This can be very important to owners.
Short Sales Homes Today
The Federal Reserve estimates that the equity held by US homeowners increased by nearly $6.8 trillion between 2011 and 2016. The National Association of Realtors (NAR) said prices for existing homes prices in March reached $236,400 – that’s up 6.8 percent in a year and represents the 61st consecutive month of year-over-year gains.
At the worst moments during the mortgage meltdown HUD, had about 89,000 foreclosed homes in its inventory, properties financed with FHA mortgages. Today, HUD has about 16,200 such properties, and most of those are actually under contract.
With so much additional equity, the need for short sales has largely vanished. However, short sale opportunities are still out there. The reason is that while the housing sector has broadly recovered, it has not universally improved.
Read: Buying A Home In A Seller's Market
According to NAR, at the end of last year, 133 out of 152 metropolitan statistical areas had higher real estate values. An additional 19 metro areas did not.
What these numbers tell us is that short sales are a casualty of good times. You can still find them, maybe in one of those 19 metro areas where home prices declined in 2016. Otherwise, short sales are going to be awfully difficult to locate.
What Are Today’s Mortgage Rates?
Current mortgage rates should make it easier to buy a a short sale house. They have fallen recently to some of the lowest levels of 2017.
You can find the best deal on financing by comparing quotes from several lenders and choosing the one that’s right for you.
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