This is generally how a real estate short sale works
A surprising number of people are using the phrase "real estate short sale" currently and that has drawn a number of curious people to wonder what all the commotion is all about. 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. Real estate prices have dropped dramatically, and the sell time has risen as well. 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.
Banks undergo a real estate short sale when they let a property be sold for an amount of money that is less than what it is worth. The following two conditions must be met in order for the bank to approve such a deal. 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. The second condition is kind of obvious, but it dictates that the owners will be unable to continue making mortgage payments on the property.
For example, a property that was purchased five years ago with an adjustable rate mortgage for 217,000 dollars. 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.
In a five year time span, the amount the mortgages would have been paid is negligible. 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. Additionally, we end up with a real estate short sale situation once one of the owners has lost their job.
The bank may decide to save expenses and time delays that a foreclosure would cost by simply allowing a short sale. 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. If the lenders and owners do not agree on the terms of the sale, complications can result, but in general, that is how the real estate short sale works.
For owners going through a real estate short sale, the experience can be a dreadful one, but there are experiences which can be far worse. Having to go through the experience is awful, but it is a lot better than having a foreclosure on your credit report. On the other side of the coin, it can often represent an excellent buying opportunity for the savvy real estate investor.
Banks undergo a real estate short sale when they let a property be sold for an amount of money that is less than what it is worth. The following two conditions must be met in order for the bank to approve such a deal. 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. The second condition is kind of obvious, but it dictates that the owners will be unable to continue making mortgage payments on the property.
For example, a property that was purchased five years ago with an adjustable rate mortgage for 217,000 dollars. 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.
In a five year time span, the amount the mortgages would have been paid is negligible. 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. Additionally, we end up with a real estate short sale situation once one of the owners has lost their job.
The bank may decide to save expenses and time delays that a foreclosure would cost by simply allowing a short sale. 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. If the lenders and owners do not agree on the terms of the sale, complications can result, but in general, that is how the real estate short sale works.
For owners going through a real estate short sale, the experience can be a dreadful one, but there are experiences which can be far worse. Having to go through the experience is awful, but it is a lot better than having a foreclosure on your credit report. On the other side of the coin, it can often represent an excellent buying opportunity for the savvy real estate investor.
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