First-time Morris and Sussex County home buyers get a whole slew of new terms thrown at them.  Perhaps you’ve heard the term “short sale” bandied about, but wondered what the heck that meant.  Never fear! Here, Team Nest Builder offers a topline explanation to help you better understand the Morris and Sussex County home short sale.

Definition, Please

A short sale occurs when a property is sold at a price lower than the amount the homeowner owes on the mortgage, and the homeowner's mortgage lender(s) agrees to the "short" payoff.

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Approval Needed

A short sale requires the mortgage lender’s approval because they need to verify that the homeowner can’t continue to pay the mortgage and determine if a short sale is better for their balance sheet than foreclosing on the property.  A lender might accept a short sale with the property worth less than the balance of the mortgage if the borrower can’t continue to make the monthly loan payment, doesn’t have enough savings or other collateral that can be liquidated to pay back the full balance of loan, but needs to leave or get out from under a payment they can’t afford.

Property with Benefits

So, who benefits from a short sale and how?

  • Home sellers – Avoids foreclosure and the many headaches that come with a foreclosure, allowing a graceful transition into more affordable housing and a rebuilding of their credit score.
  • Buyers – Purchases a property at below market value and avoids having to deal with the risks of buying a foreclosed property.
  • Seller's mortgage lender – Mitigates its losses by avoiding the costly process of foreclosing and reselling the property and settles some portion of the loan balance.
  • All other parties – Listing agent, buyer's agent, appraisers, mortgage broker, the title company, and the insurance company all earn from a short sale transaction for services rendered, albeit less than they otherwise earn with more work than the average real estate sale transaction.

Proceed With Caution

Do short sales present possible pitfalls?  Indeed:

  • The short sale process may take more time than a traditional retail sale to complete and it may be difficult to pin down a firm closing date until the seller's mortgage lender(s) agrees to the short sale. Junior-lien holders such as second mortgages, HELOC lenders and other special assessment liens may also need to approve the short sale.
  • Many roadblocks could possibly derail a short sale.
  • Buying the property on an "as is" basis and “where is” at the time of closing.  The buyer often needs to obtain multiple permits, attend to repairs before closing, and deal with unpredictable closing costs at the time of their closing which can be withering.
  • The seller of the property normally pays some money at closing or agrees to an unsecured debt in order to gain short sale approval. If the seller refuses, then a short sale may fall through even if the seller has approved the sale.
  • The approving lender rarely agrees to pay for any extras that a regular seller normally agrees to. This could mean higher closing costs for the buyer.

Experience Necessary

Due to the complex nature of Morris and Sussex County home short sale transactions, buyers should work with a local real estate firm with a track record in successful short sales, such as Team Nest Builder.  Our experience and connections assist in identifying and resolving possible hurdles, helping put together a viable offer, protecting your interests, and negotiating the best deal for you. Still have Morris and Sussex County home short sale (or any other real estate-related) questions? Call or email Team Nest Builder now!

Additional Source:  Freddie Mac