LAN Field Real Estate

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. The popularity of real estate short sales in TV and other media can be attributed to financial institutions choosing them over foreclosure in a negative real estate market. The time it takes to sell a property is extremely high, and the prices on real estate have reached a considerable low. Detroit is one such example of this. A real estate market that is not doing so well is the giving the need for short sale real estate opportunities to grow.

A bank allows a real estate short sale to occur when the bank consents to letting their property be sold for an amount smaller than the amount owed on it. The following two conditions must be met in order for the bank to approve such a deal. A property value that allows the sale price of the property to be too low to cover the outstanding balance of the mortgage is required. Secondly: The owners find themselves unable to continue to make mortgage payments on the property.

Let’s look at an example property that was bought five years ago for the rate of 217,000 dollars with an adjustable rate mortgage. The owners decided two years later that they needed a second mortgage of 10,000 dollars, bringing their total to 227,000 dollars. Home owners typically have made only a negligible dent in the amount of money that has gone towards paying off their debt in five years. It’s also likely that similar homes have a property value of 215,000 dollars and that the adjustable mortgage rate has risen four points. If we toss in the fact that one of the owners has just lost her job, we should realize that a real estate short sale is on the horizon.

The bank may decide to save expenses and time delays that a foreclosure would cost by simply allowing a short sale. It is better to have a known amount of money now and the property off of the bank’s books than an unknown amount of money at some distant point in the future. This is generally how a real estate short sale works, though there are other complications that can arise from having owners and lenders not agreeing to the terms of the sale.

A real estate short sale is not a very pleasant experience, but it certainly isn’t the worst experience they could have. A foreclosure, for example, would be far worse to have on your credit report. For the intelligent real estate investor, however, it can represent a great buying opportunity.