The short sale process is a real estate transaction where a financial agreement is made between a borrower who is unable to repay a loan amount that was taken against the property he/she owns and a lender who has given the loan. It is also considered as a more beneficial alternative to foreclosure.
During the short sale process, the borrower and lender must come to an agreement to sell the property at a price that is lower than the outstanding loan amount that is owed by the borrower. A real estate agent works for the seller to both negotiate with the bank on an agreeable sale price and find a buyer that is willing to weather a process that can be long and difficult to complete. Buyers typically like short sales due to the fact they can get a better price on the home than what it typically might cost.
As mentioned, the short sale process can be lengthy. Negotiations must be done with the bank and they must agree that the property should be sold for less than what is owed on the loan.
A real estate agent or loss mitigation expert should prove valuable during the process. There will be more paperwork than usual and the bank will require the homeowner to document income and expenses to make sure a short sale is an appropriate solution. A hardship letter will also be required to document why the borrower is unable to meet the existing loan obligations.
If done correctly, it is a victory for all parties involved. The seller gets out from under an unaffordable loan, the buyer gets a better deal and the bank is able to maximize recovery of their losses. Furthermore, for the seller, they minimize damage to their credit and will be able to recover faster than if they chose to go through with the foreclosure process.
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