Futterman, Sirotkin And Seinfeld, LLP
Futterman, Sirotkin And Seinfeld, LLP

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Short sale homes: A bargain or a waste of your time?

On Behalf of | Jun 7, 2022 | Real Estate |

For someone looking to buy a home, the very name “short sale” seems to imply they’ll automatically get a good deal and it will happen quickly. But this is not necessarily the case at all. The reality is that a short-sale home may not save you any money and it may take much longer to purchase. Before you try to buy a short-sale home, make sure you understand what you’re getting into.

Why is a home sold on short sale?

For a short sale to occur, a couple of things must be true – first, the homeowner must be behind on their mortgage and unable to catch up. The homeowner is in a position where foreclosure is looming and a short sale is the means by which they will avoid foreclosure.

The second prerequisite is that the housing market is depressed enough that the house is now worth less than the remaining balance on the mortgage. This fact is what provides the mortgage lender with the incentive to pursue a short sale. Without it, the lender is better off foreclosing on the home and getting their money back that way.

The lender is in control

This is perhaps the most important thing to understand about any short sale – the mortgage lender has the final say on any proposed sale. Let’s say you pursue a short sale and reach an agreement with the homeowner. The lender can accept the sale, reject it entirely or request modifications to the terms, without which it won’t agree.

Even if the initial listed price of the short sale appears like a bargain, and even if the homeowner agrees to a bargain price, it’s meaningless unless the lender also agrees. Furthermore, because the lender’s approval must be gained, this can add significant time to the closure of a short sale – it can take many months or even a year to complete.

There are opportunities when it comes to short sales but they won’t all be opportunities and they won’t be for everyone. If you’re considering buying a house on short sale, speak to someone who is experienced in New York real estate. They can help you decide whether it’s truly worth pursuing.