Short sale properties are real estate properties with incomplete mortgage payments. Short sale properties are sold because the homeowner is unable to continue paying for the mortgage. A short sale may only proceed if it is with the mortgage lender’s approval.
Who benefits from short sale properties?
The short answer is: everyone. The homeowner benefits because the property under mortgage won’t have to be foreclosed, which would be reflected on his credit history. The buyer would be able to buy the mortgaged property at a lower price. The mortgage lender, on the other hand, would be able to avoid a total loss. In some ways, everyone gets something out of the transaction.
What to remember
If you’re buying a property on short sale, do your due diligence, as with any real estate purchase. Inspect the property in person, or better yet, hire a professional to do so. Speak to the homeowner or his representative about the condition of the home. See to it that you can flip the property into a good home or an investment with high resale or rental value -- this entails, among other things, a viable location in an up-and-coming neighborhood. Make sure that there is proper documentation before proceeding with the transaction. Buying short sales take longer than a standard real estate transaction; the lender has to review the homeowner’s request for a short sale before either seller or buyer can proceed with the transaction.
As a mortgage lender, it would be wise to thoroughly investigate the homeowner’s genuine ability to pay, as well as the buyer’s ability to purchase the short sale.