If you’ve been in the market to buy a home in Albuquerque for any length of time, you may have come across some homes for sale that are short sales. These are homes that are being sold at a price that’s lower than what the current owner owes the their lender. How does a short sale work, and is it a good deal for you?
How does a short sale work?
When a home owner has problems paying off their mortgage, they can often put their home up as a short sale. At this point, they have to sell the home for less than the balance on the mortgage.
The only other option for that homeowner would be foreclosure. That’s what makes a short sale a good option, as the bank avoids having to foreclose on the home, and the seller can get out of the deal without too much damage to their credit.
What are the conditions for a short sale?
The factor that precipitates a short sale is a drop in the house price by at least 20%. The homeowner no longer has equity in the home. However, they have no choice but to continue paying the mortgage. When they can no longer do so, it’s time to get help.
Before the homeowner can contemplate a short sale, the lending institution must approve. The bank is likely going to lose money in the process, so it needs to weigh in on the decision. Documentation must be presented that shows a short sale as the best option for all parties involved.
Should you buy a short sale property in Albuquerque?
Buying a home at a reduced price seems like an obvious choice. But be prepared for a lengthier process, as it requires more paperwork than a normal sale. It can take up to four months to complete the sale.
Getting the help you need
When you find a short sale property you’re interested in, your agent will help you with doing research on the property and making sure all the paperwork is in order.
You’ll then make an offer on the home, much like at an auction. It may be the case that another buyer outbids you. You will have the option to raise your bid if your finances allow you to.
Keep in mind that even though a short sale may seem like a good deal, you should weigh the pros and cons of the home you’re looking at buying. If the homeowner was having financial difficulties, they may not have been able to keep up with maintenance as well. A home inspection will reveal any of those potential issues.
If the home does need a lot of work, the cost of that work may wipe out whatever you saved on the price of the home. And if you need to move immediately, a short sale may not be a good idea, as the process takes a while to complete.
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