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What The Heck is a Short Sale?

By Daren Newman - Broadway Capital Group

A short sale typically is executed to prevent a home foreclosure . Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing.

In real estate, a short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagee.

Extenuating circumstances delegate whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower's financial situation.

How to Succeed at Short Sales

Flat or falling home prices, home-equity credit lines, 100-percent financing that sucked out equity, and spiking interest rates on adjustable mortgages are converging to create a regrettable, but expanding, niche for real estate practitioners: the short Sale.

Some, although by no means all, short sellers may also be in default on their mortgage loans and be headed for foreclosure. However, home owners who bought at the top of the maket who took out large amounts of equity with a refinance and who now need to sell because of divorce or job transfer may also find themselves upside down, owing more than the home is currently worth when closing costs are factored in.

How Long Does it Take to Complete a Short Sale?

Although response times vary from lender to lender, it can take two weeks or as long as 60 days to receive an approval of a short sale from a lender. That's why it's critical that buyers understand and accept that time frame before they make an offer. With many more adjustable rate mortgages ready to reset to higher loan amounts in the next couple of years, short sales represent a growing sector of the market.

 

 

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