Pros and Cons of a Short Sale
A short sale can be described as a type or real estate transaction in that the owner has decided to reduce the amount of the mortgage. This type of sale is beneficial for both the buyer and seller, but it also has its downsides. Before you purchase a short-sale, it is important to understand all of the pros and disadvantages. Listed below are some of these advantages and disadvantages.
The short sale process is often a lengthy process. It can take weeks to months, even a year. It takes expertise, detail, and a lot of patience to make it happen. This process can help sellers avoid foreclosure, and even avoid legal eviction. It can also speed up the purchase of a new home. It can also save them from losing their house to foreclosure. These drawbacks outweigh the benefits of a quick sale.
Another disadvantage of short-sales is that the sellers can’t profit from it. This could mean that the house cannot be sold to a friend or family member. Banks do not want to lose money from short sales. In some cases, banks may include a clause that allows the seller to transfer funds from one property to another, provided that the transaction has been completed. Talk to a real estate agent if you are considering a short-sale. They can help you understand your options and potential pitfalls.
Another problem with a short sale is the long process. Short sales often require larger down payments than traditional sales and can take as long as a year to close. The result is that there could be a bidding competition in which the buyer will pay less for the home. Short sales are safer than foreclosure since homeowners remain in the home. This reduces the chances of vandalism or other problems occurring before the property is sold.
Another issue is that it can take many months for a home to be sold after the lender approves. This means you will have to deal with potential buyers and won’t get a quick sell. It may take longer to sell your short sale than a normal house, which is one reason why a short sales is preferred to a foreclosure. You must ensure your short sale is handled professionally.
Short sales can also be a disadvantage. The lenders are often motivated to recoup as much as possible, and will set a competitive price for the home. This means that the price may be higher than expected. You may have to pay a large amount for repairs or upgrades. Before you make an offer, get a home inspection. This will help you avoid spending time and money on repairs you don’t need.
A short sale can be a good choice if you have cash to spare and can afford a lower initial mortgage. Unfortunately, short sales can take time so it’s a smart idea to hire a professional real estate agent to guide you through the process. A short sale has one disadvantage: the house is sold “as-is,” meaning that you cannot negotiate a lower price or request upgrades and repairs. You must ensure that the lower price is worth it.
A short sale also has the disadvantage of having the proceeds of the sale taxed by Internal Revenue Service. However, the Mortgage Forgiveness Debt Relief Act (MFDRA) does provide tax relief to principal residence owners who opt for a short sale. In this instance, the IRS will also forgive a portion of the mortgage debt owed to the lender. To fully understand the pros and cons of a short sale, it is advisable to consult an accountant or financial professional before you make any decisions.
A short sale offers the possibility of a property being sold in a better state than a foreclosure. Short sales can often attract cash buyers who accept an offer from the lender. The risk of being foreclosed is much lower than that of a mortgage loan. Buyers who are patient enough wait for the loan approval can get a great deal from a short sale. The downside is that if a seller rejects your offer, the bank could reject it.