Simply put, a short sale is a term describing the sale of a home for less than what is owed to the lender. This post explains why short sales can be very beneficial for homeowners who find themselves unable to continue paying their mortgages – and wish to avoid the logistical headaches and financial drawbacks that accompany home foreclosure.
No one wants to face foreclosure. In addition to the stigma and damage to one’s pride, foreclosures generally end up costing homeowners a substantial amount in legal fees and often lead to bankruptcy. Short sales are an excellent alternative. Through an agreement between the homeowner and the lending bank, the home is sold at a substantial discount. This creates a a preferable situation for all three parties:
- the bank recoups most of its investment and avoids the costs associated with foreclosure,
- the seller avoids severe damage to their credit and all the other drawbacks of foreclosure,
- and the buyer purchases the home at a reduced price.
In addition, short sales can save homeowners considerable money during times of financial difficulty. Because these sales help avoid foreclosure, banks will often forego pursuing a deficiency judgment for the remainder of the original mortgage loan. Often, it makes more financial sense for banks to simply write off these losses – which can be less substantial than the cost of a lawsuit.
Savvy buyers can benefit from short sales as well, since these homes are often in much better condition than foreclosures and can be purchased for a sizable discount. A little patience goes a long way, it should be noted, as short sales may take longer to close than traditional properties.
Finally, short sales also benefit the economy. They prevent damage to the housing market caused by reduced home values from foreclosure. And they have the added ability to revitalize certain neighborhoods by creating opportunities for buyers to purchase homes at lower than average prices.
At Newtown Realty, we are eager to assist both sellers and buyers in obtaining peace of mind and reaping the rewards that can accompany short sales. Feel free to contact us with any questions you may have about the process.
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