A great opportunity for the smart real estate investor
The term 'real estate short sale' is being bandied about more and more as of late. The popularity of real estate short sales in TV and other media can be attributed to financial institutions choosing them over foreclosure in a negative real estate market.
In all parts of the country, real estate prices are down and the time it takes to sell properties has risen dramatically. It is no exaggeration to say that some regions are experiencing a virtual market meltdown (the Detroit market is one good example). A real estate market that is not doing so well is the giving the need for short sale real estate opportunities to grow.
The exact definition of a real estate short sale is that it is what occurs when a bank agrees to let a property be sold for less than the amount owed to the financial company. There are two conditions that must be met before a bank is likely to approve this: Firstly: Market values are such that the property's sale price cannot cover the outstanding mortgage balance(s). A complete inability to make the mortgage payments must also be present for the bank to agree to the sale.
Let's look at an example property that was bought five years ago for the rate of 217,000 dollars with an adjustable rate mortgage. Two years after purchasing their property, the owners also took an additional mortgage out, to the price of 10,000 dollars. In a five year time span, the amount the mortgages would have been paid is negligible. Further assume that the property is in a part of the country where market values have fallen to 215,000 dollars for comparable properties, and that the adjustable mortgage interest rate has recently increased from 7 to 11 percent. Once one of the owners loses their job, the situation is ripe for a real estate short sale.
For a bank, a foreclosure can mean a lot of time and money spent that a short sale would not. The reason for this is that the banks believe it is better to get the property off their books and accept a smaller amount of money they are guaranteed to get than to accept an unknown amount in the future. Those are the basics of a real estate short sale, though numerous complications can arise from having multiple owners and lenders not agreeing to a short sale terms.
A real estate short sale is an unpleasant experience for an owner, but it is not the worst thing in the world. If nothing else, it certainly beats being forced to accept a foreclosure on your credit report. On the other hand, a truly savvy investor can take advantage of these short sales for excellent buying opportunities.
In all parts of the country, real estate prices are down and the time it takes to sell properties has risen dramatically. It is no exaggeration to say that some regions are experiencing a virtual market meltdown (the Detroit market is one good example). A real estate market that is not doing so well is the giving the need for short sale real estate opportunities to grow.
The exact definition of a real estate short sale is that it is what occurs when a bank agrees to let a property be sold for less than the amount owed to the financial company. There are two conditions that must be met before a bank is likely to approve this: Firstly: Market values are such that the property's sale price cannot cover the outstanding mortgage balance(s). A complete inability to make the mortgage payments must also be present for the bank to agree to the sale.
Let's look at an example property that was bought five years ago for the rate of 217,000 dollars with an adjustable rate mortgage. Two years after purchasing their property, the owners also took an additional mortgage out, to the price of 10,000 dollars. In a five year time span, the amount the mortgages would have been paid is negligible. Further assume that the property is in a part of the country where market values have fallen to 215,000 dollars for comparable properties, and that the adjustable mortgage interest rate has recently increased from 7 to 11 percent. Once one of the owners loses their job, the situation is ripe for a real estate short sale.
For a bank, a foreclosure can mean a lot of time and money spent that a short sale would not. The reason for this is that the banks believe it is better to get the property off their books and accept a smaller amount of money they are guaranteed to get than to accept an unknown amount in the future. Those are the basics of a real estate short sale, though numerous complications can arise from having multiple owners and lenders not agreeing to a short sale terms.
A real estate short sale is an unpleasant experience for an owner, but it is not the worst thing in the world. If nothing else, it certainly beats being forced to accept a foreclosure on your credit report. On the other hand, a truly savvy investor can take advantage of these short sales for excellent buying opportunities.
posted by Credit Counseling at
12:56 PM
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