Thursday, May 14, 2009

What is a Short Sale?

What is a Short Sale? You’ve heard the phrases “upside down” and “under water” recently with regard to the situation many homeowners are finding themselves in. What that means is that the value of an owner’s home is LESS than the amount of his outstanding loans or mortgages. For example, if your home is worth $200,000 but you have a loan of $225,000, you are under water.

If you must sell and cannot afford to bring the $25,000 to closing and do not want to consider a foreclosure, you might approach your lender with the idea of a short sale. Certainly not a quick fix, a short sale generally does less damage to your credit than a foreclosure. While most lenders will not be thrilled at the prospect of a short sale, they are aware that a foreclosure is usually a far more time-consuming and costly option. In a real estate market where housing values are going down it is in the best interests of the lender to liquidate their problem loans as quickly as possible.

If you are a buyer and considering the purchase of a “short sale” be prepared for a much longer time line from signing your Purchase & Sales agreement to closing. These types of sales are taking 3 to 6 months to complete. So if you have the time and can be patient, it can be a great opportunity to buy a property you might not be able to afford otherwise.

Whether you are a Buyer or Seller of a short sale, my suggestion is to find a Realtor and attorney who are experienced in this type of real estate transaction. For more information, feel free to call
me at (401) 457-1745.

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