For most people, buying a home is the single largest purchase they’ll make throughout their lives. It represents a significant financial investment, but it can also be a large emotional investment. Naturally, the buyer wants to get the best deal they can, so they may consider a short sale. But is that the right approach for you?
What is a short sale?
Simply put, a short sale is when the homeowner owes more on their mortgage than the home is currently worth. A short sale comes about because the homeowner has fallen behind on their mortgage payments and is unlikely to ever be able to catch up.
At the same time, the value of the home has decreased. The availability of short sales depends greatly on the health of the housing market – short sales were relatively common during the market collapse of 2008 but are less common when the market is stable and home values are good.
What’s the advantage of short sales for the buyer?
There’s a chance you can get a really good deal on a short-sale home. Considering the state of the mortgage, the lender is incentivized to complete the sale and recoup as much of their investment as they can. Additionally, since the homeowner is still living in the home, a short-sale home is usually in better repair than a foreclosure.
What’s the disadvantage?
Time is often the biggest downside of a short sale. The mortgage lender is the one who controls the sale, rather than the homeowner. As a result, the process can drag on for months. This is particularly true if the homeowner has a second mortgage. A second lender may receive little to no income from the short sale and, therefore, doesn’t have the same incentive to agree to an offer.
Short sales offer an opportunity to potential home buyers, but they’re also complex and time-consuming. If you’re interested in pursuing one, Petti Murphy & Associates can help you. We have extensive experience in the greater Chicago residential housing market.