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Huge Real Estate Information
By editor | August 2, 2008
You may have heard the phrase “real estate short sale” being tossed around more and more lately. Anyone who has read newspapers or watched TV has probably come across some sort of stories about the declining real estate market leading banks to consider real estate short sales as an alternative to foreclosure. The real estate crisis throughout the country has made the prices decrease and the sell time increase. Detroit and similar regions are, it is fair to say, experiencing a full real estate market meltdown. These declining real estate markets are the main reason for the rise in short sale real estate.
The exact definition of a real estate short sale is that it is what occurs when a bank agrees to let a property be sold for less than the amount owed to the financial company. There are two different conditions that must be in place before the banks will agree to this. Foremost, you will need to have a market value that is in such bad shape that the sale price of the property cannot cover the balance on the mortgage. Condition number two is that the owners will be unable to make any further payments on their mortgage.
For instance, an owner might have used an adjustable rate mortgage to buy a home for the price of 217,000 dollars five years ago. Let’s say that two years after purchasing the property the owners took out an additional 10,000 dollars second mortgage, which means that today the owners owe 227,000 dollars on the property. Home owners typically have made only a negligible dent in the amount of money that has gone towards paying off their debt in five years. Let’s also believe that the property is in a part of the country where the market values have fallen to 215,000 dollars for similar properties, and that the adjustable mortgage interest rate has risen from seven to eleven percent. Once one of the owners loses their job, the situation is ripe for a real estate short sale.
Rather than go through the expense and time delays that a foreclosure proceeding would require, the bank may decide that allowing a short sale makes more sense in the long run. The reason is that it is far better to have a definite amount of money know and the property off the bank’s books than waiting on an unknown amount of money at some unknown point in the future. Those are the basics of a real estate short sale, though numerous complications can arise from having multiple owners and lenders not agreeing to a short sale terms.
While a real estate short sale is an unfortunate trauma to go through for most owners, it does not signify the end of the world. If nothing else, it certainly beats being forced to accept a foreclosure on your credit report. On the other hand, a truly savvy investor can take advantage of these short sales for excellent buying opportunities.
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