Understand Short Sales on Long Island
Buying a home can be a dream come true for many people, but home ownership is not without its pitfalls. One difficult bind to be caught in is if your mortgage is “underwater.” That means your home is worth less than the money you owe on your mortgage. There are a variety of reasons why this can happen. Home prices can fall. The value of a home can be assessed too high. Home prices can be flat as neighborhoods become less popular.
Whatever the reason, having an underwater mortgage is a tough situation because in theory, a homeowner can’t get rid of their underwater property unless they absorb the loss. But there are ways to get out from an underwater mortgage. One way you may have heard about is a short sale. While short sales come as the result of unfortunate circumstances, Cliffco Mortgage Bankers wants you to know about short sales because they can be a tremendous opportunity for home sellers trying to get out from an underwater mortgage and buyers who are looking for a good deal on a home.
What a Short Sale is and Why They Happen
The Freddie Mac website defines a short sale as a transaction in which a property is sold at a price lower than the amount the homeowner owes on the mortgage. It can only occur if the mortgage lender signs off on the sale. But lenders will agree to do that in cases when it’s clear the homeowner won’t be able to pay off the mortgage.
Why would a lender sign off on a deal which requires them to take a loss on the mortgage? It allows them to have better control of the process. If a house goes into foreclosure, it can be a long drawn-out process and the resale of the property may put the lender in a worse position than they would have been had they allowed the short sale. It’s a way to mitigate damages.
Potential Benefits and Problems with Short Sales
But there are plenty of reasons why a lender might deny a short sale. According to the San Francisco Chronicle, a lender might turn down the request for a short sale if they believe they have a better chance of doing well at a foreclosure auction. That’s why it’s critical for homeowners to contact their lenders when they discover they’re not going to be able to make mortgage payments.
For potential buyers, short sales are an opportunity to find a real estate bargain because the sale will be for less than what would normally be paid for a similar transaction. But there are pitfalls for short sales buyers as well. According to Forbes, It’s important to make certain that the seller has defaulted on their loan and to know who all the lien-holders are on the property since there could be a second mortgage. While a short sale is often done to escape a drawn-out mortgage process, that doesn’t mean there won’t still be red tape. Short sales can take time because the approval process can be lengthy, particularly if there’s more than one lender involved. And the home may not be in pristine condition. If the owner couldn’t afford to make mortgage payments, they may not have done much in the way of maintenance.
Cliffco Mortgage Bankers Will Explain All Your Options
Short sales are a way to keep home owners with a difficult mortgage solvent. They help buyers find bargains and help lenders move on quickly from losses. If you think you might want to purchase a home in a short sale or if you’re interested in home ownership, give Cliffco Mortgage Bankers a call. We’ll explore all of the options with you. Contact us today.