A short sale is a sale of real estate by the homeowner for less than the amount owed on the mortgage. This type of sale requires approval from the lender for the deal. Buying a short sale home offers a number of benefits to buyers. Short sales are the most cost-effective option for the bank to recover the leftover mortgage of the homeowner. However, the bank must agree to sell the home for less than the value of the current loan. Bank also has an alternative option for short sale and that is foreclosure. But foreclosure comes with numerous disadvantages for the lender.
Following are the benefits of buying a short sale home over foreclosure
1) It will protect your credit
The bank can file a lawsuit against the homeowner while recovering the difference in the amount that was paid and the amount of the loan which may lead to file a deficiency judgment on homeowner’s credit that makes a negative impact. The homeowner receives a mark on his or her credit that creates problems for him or her to borrow money for another purchase.
2) It can save you from foreclosure
Bank will often settle for a short sale because it’s better to recover a portion of the mortgage than to absorb a total loss. Foreclosure can be deposited to the owner and may cause a loss of money to the lender. The short sale presents less damage to homeowner’s credit report than a foreclosure. It allows him to recover and buy a new house more quickly.
3) It is a cost-effective option
A short sale will save a lot of money whereas foreclosure cost around $7500 (according to US Congress joint economic committee). The foreclosure process can be lengthy. It could also lead to the bankruptcy. It could ease the current homeowner’s hardship and put him in a more manageable position.
4) It can benefit investors
Buyers get the property at the reduced rate, and buying a short sale home can be advantageous to an investor in the number of ways. Foreclosures may lead to expenses related to the fixing of the property to prepare it for resale. The lender may offer low-interest rates to get the property sold quickly.