Many first-time buyers never consider buying a short sale home. It’s a shame too, considering that new homeowners can save a lot of money this way. For a first-time buyer in Charlotte, NC, a short sale is a great way to stay within their home buying budget.
Short sales are becoming more popular. They are a favorable alternative for homeowners who can no longer afford to pay their mortgage. This gives buyers, especially first-time buyers, the chance to get a great deal on a house. However, while a short sale can be great for a first-time homeowner., there are more steps involved than buying a typical home for sale. Your offer not only has to be accepted by the seller, but by their mortgage lender as well.
The short sale process is admittedly a bit confusing at first. It can be a difficult concept to grasp. This article will help you better understand what a short sale is and how it works. It will also go into the benefits and disadvantages of buying a short sale house. If you’re a first-time buyer, it will help you decide if a short sale purchase is right for you.
What is a Short Sale?
For a homeowner down on their luck, a short sale can be a lifesaver. It can be considered when a person is no longer able to pay their mortgage. A short sale helps the homeowner avoid foreclosure, and all the negative outcomes that follow.
A short sale can be set up if the lender is willing to accept less than the amount remaining on the mortgage. For example, if there is $100,000 left on the mortgage, the lender may accept $80,000 from the sale of the house. They may then choose to completely forgive the $20,000 difference. In some cases, that will be all the lender expects the homeowner to pay.
Before the lender agrees to a short sale, they will want to be certain the homeowner has no options left to pay the mortgage. This is why the lender will need proof of financial hardship. This might be proof of unemployment or a significant medical bill.
In a short sale, the lender has the final say. This means a buyer might put an offer on a short sale house, and the seller might accept it, but the lender may turn it down. The lender will want to recover as much of their money as possible. If they feel the offer isn’t enough, they can reject it.
What Makes a Short Sale House a Good Choice?
If you’re a first-time buyer, you’ll want to know the advantages of buying a short sale house. Here are just a few:
1. The price. This is probably the most obvious reason to go for a short sale house. They can be listed for as much as ten to twenty percent under market value. If you have a limited budget and your dream home is just out of reach, you might consider looking at short sale homes. You’ll be able to get a bigger home or choose a better neighborhood, for the same money you’d be spending elsewhere. This is great for first-time buyers.
2. They’re a good investment. In a declining real estate market, if you bought your home under market value, then it provides a financial safeguard. In a healthy real estate market, it means the home has the potential for larger profit in the future. This is important if you have plans to resell. If you buy a short sale house as a rental property, you can still charge regular rates for rent. You’ll end up making the house’s value back quicker than if you’d bought it at market value.
3. It can be relatively easy to get financing. Banks would rather avoid having to approve a short sale in the first place. If they do have to go into a short sale, they want a borrower who can pick up the payments. This is why they may offer buyers, such as yourself, attractive financing deals. They can continue receiving their regular mortgage payments this way. You can worry less about arranging a mortgage yourself.
4. Homeowners tend to be more cooperative. A foreclosure means an eviction. No one wants their house taken from them. Plus, foreclosures are very damaging to someone’s credit rating. In the case of a short sale, however, a homeowner”s credit doesn’t take as much of a hit. They also have more control of the situation than with a foreclosure. For this reason, they tend to be more cooperative and easy to work with.
What Makes a Short Sale Difficult?
A short sale is generally a great way to buy a house. There are some things that first-time buyers need to know, though.
1. The biggest drawback is the length of time it takes to close the sale. Compared to buying a regular house, a short sale can take a long time. The amount of time it takes is typically counted in months. There is a lot of paperwork to handle and a lot of major decisions are made by the lender. If you put an offer on a short sale house, be prepared for a long wait.
2. Even though the homeowner may be cooperative, it doesn’t mean the house is in perfect shape. You’ll be getting the house in as-is condition. If someone is in financial hardship, there may be repairs and upgrades that they were unable to complete on the home.
3. You may be beaten by another offer. Unfortunately, you’ll never be able to know how many other offers have been made. If someone comes to the seller and lender with cash and they are ready to buy, you might be left empty-handed, months into the short sale process.
Buying a house on a short sale has its pros and cons. If you’re a first-time buyer, though, it is best to go for it. A short sale will get you deals you can’t get anywhere else.
The secret weapon to a successful short sale buy is a good agent. They will guide you through the process. And it's even better when you get a Charlotte, NC, short sale agent. That’s the best level of expertise you can get, and Nancy Braun has it.
Don’t waste time when you can get that dream house of yours lined up. Call Nancy Braun at 704-997-3794 to get started today!