A short sale is still owned by the homeowner, who owes more on the mortgage than the home is worth. “The short sale is, in my opinion, far better than buying a foreclosure because the home is generally in better condition because it’s been occupied,” she says.

What are the pros and cons of a short sale?

The Pros and Cons of Buying a Short Sale

• Short sales can take a long time.
• They are sold as-is.
• Make sure the lower price is really worth it.
• The good deal factor can be influenced by the market conditions.
• Less competition.
• Don’t overlook needed repairs.
• Home inspections are a must.

Do you still have to pay mortgage during short sale?

In a short sale, the proceeds from the transaction are less than the amount the seller needs to pay the mortgage debt and the costs of selling. For this deal to close, everyone who is owed money must agree to take less, or possibly no money at all.

Does a short sale benefit the buyer?

Rather than continue losing money, or wasting more money on a foreclosure, many banks offer buyers of short-sale properties favorable financing terms to make the sale more attractive. The lender may offer a low interest rate or other buyer-friendly terms to get the property sold and avoid further expenses.

Why is a short sale better than a foreclosure?

Choosing a short sale allows you to retain some dignity in knowing that you sold your home, and you won’t suffer the social stigma of a foreclosure. You won’t have any mortgage payments to make, unless you choose to make them, and under Fannie Mae guidelines, you’ll be eligible to buy another home in two years instead of 5–7 years.

When is a short sale a good thing?

A short sale typically occurs when the homeowner has fallen behind on the mortgage payments due to financial hardship. For the bank or other lender that owns the mortgage, a short sale is preferable to letting a home go into foreclosure.

What are the risks of buying a house in a short sale?

Another risk of a short sale is losing out on the property to on all cash buyer or a buyer who is able to put down a large down payment. When agreeing to a short sale, banks and other lenders prefer to deal with these types of buyers. They see them as less risky than a buyer who needs to get a large mortgage in order to purchase the property.

Can a seller take a loss on a short sale?

Since the owner is trying to get their mortgage lender to accept less than they are owed for the property, the lender must approve the sale. Lenders are not necessarily too eager to take a loss on their loan.