Have you been facing trouble in paying off the debts against your property? If yes, then here’s how you can release your lien by paying less than what you owe to your lender.
Depending on the real estate market and your financial status, sometimes it may be difficult to pay back the amount you borrowed against your property. In such a situation, your lender may try to sell off your property in order to recover the balance of the loan. This is known as foreclosure. However, there is another method by which you can settle the loan amount. Read this article to know all about it.
What Is a Short Sale Property?
A short sale property is one, which is sold off at a price lower than what you owe your lender on the mortgage. If you are unable to pay off your debt due to shortage of funds, you can request your lender to approve a short payoff. Your lender may accept a short sale if you are unable to pay monthly EMIs, incapable of paying the balance loan amount, and if you need to move out of the property.
Do You Need Lender’s Approval in a Short Sale?
Yes, your lender has to give his/her approval for a short sale. He/she will be receiving a lower amount than what you owe them on the mortgage. They will evaluate your financial condition and then arrive at a decision. They will also consider the option of foreclosure instead of short sale.
Who Benefits from a Short Sale?
As a seller, you will benefit the most from a short sale. You don’t have to go through the grueling process of a foreclosure. Unlike a foreclosure, a short sale will not reflect badly on your credit score. You can opt for an affordable house once the short sale is over.
The buyer is benefited because he/she can own a house at market value and there are no risks in buying a short sale property when compared to a foreclosed one.
Your lender will be able to reduce his/her losses by evading the process of foreclosure and resale.
A few other parties who will benefit from a short sale are your real estate agent, buyer’s agent, property appraiser, title company, and insurance company.
What Are the Disadvantages of Buying a Short Sale Property?
There are certain disadvantages associated with a short sale property:
- As a buyer, you may have to wait for a long time for the sale to complete. You may not know when you can take possession of the property, as the owner’s lender has to give his/her approval for a short sale.
- Sometimes, the seller may have to agree to pay a certain amount of money or give their nod to an unsecured debt to get the short sale approved by the lender. If the seller doesn’t agree to these terms set by the lender, the short sale will get cancelled.
- The seller may not cover additional costs associated with the property. In such a case, you have to cover additional costs, such as inspection cost, maintenance, and repair.
Should You Buy a Short Sale Property on Your Own?
Since short sale properties are involved in a lot of legal issues, it is advisable that you hire a real estate agent or a legal expert who can help you in buying a short sale property. These agents have experience and also know about the best short sale properties. They will be able to negotiate with the seller, solve any legal problems, and get you the best value for your money.
A short sale property is a good investment option because sometimes you will be able to purchase a house for a much lesser price than its current market value. This will help you in earning equity. However, remember to research such properties before you make any payment. Take advice from a legal expert if necessary.