By Izzy Barden
Sometimes, for various reasons, a property owner will have a mortgage balance that exceeds the value of the property. Once the property owner finds himself in this unfortunate situation, he or she may attempt what’s commonly referred to as a Short Sale.
This simply means that at the time of closing, the payoff to the bank or lending institution will be "short" of the total amount needed to fully satisfy the loan. This ‘short sale’ must be approved in advance by the lending institution. Different lenders have different requirements they use in order to approve a short sale and most often they will require that the seller prove financial hardship.
Short Sale properties generally get listed in one of two ways. The first way is for the Seller and their Agent to get together and agree on a price they feel will attract a buyer and hopefully generate an offer that's acceptable to the lender.
Secondly, experienced agents will work to obtain an agreement from the lender beforehand that sets the short sale price prior to listing the property in the MLS.
This is certainly advantageous to the buyer as all short sale contracts contain provisions that make them “subject to approval by the lender”. Once the offer is presented, the lender will either accept or deny it.
If it is denied, the buyer can either cancel the contract and look for another property, or offer a price that will be acceptable to the lender.
More on Short Sales later....
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