Many consumers are confused by the current real estate market and the terminology. Here is a little info about terms to consider when buying.
Short sale – The seller first considers the offer and if accepted it goes on to the lender(s). The lender(s) will need to review and accept the offer. Even if a buyer offers the list price, the lender may counter with an amount above this. The lenders are typically not involved in setting the list price.
Timeline – Prepare yourself for at least 90 days and up to 6 or more months. This will vary depending upon number of loans, liens and who the lenders are. Buying a short sale with one mortgage not in foreclosure will take typically the least time.
Foreclosure – A short sale may be subject to foreclosure if the owners have ceased paying the mortgage. Banks may slow the foreclosure process if homeowners are making partial payments and trying to sell. The foreclosure process is initiated by the Sheriff Sale. A home is not typically purchased at the Sheriff sale in redemption states like Minnesota. Homeowners have the right to redeem the property for 6 months by paying off the lenders plus interest. An agent can find out if a property redemption period is close to expiring. It may not be worthwhile to make an offer if less than 3 months are left in redemption.
Unfortunately, many homeowners are going into foreclosure without trying to sell their property. This happens for many reasons. Some may not qualify to sell short as they have not experienced a qualifying hardship.
If you have two or more mortgages please know that the second, third etc will likely pursue you personally for the balance of your debt. Know what your options are and seek out resources before this happens.
If you sell short your second, third etc lenders may be willing to take partial payment at closing and then a percent of the debt in the form of a promissory note.
Bank owned listings will be another post.