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Short Sale Definition
A short sale is a popular phrase thrown around real estate these days. If you don't know what it means to short sell a property, don't worry because you are not alone. Everyone has to start somewhere and not everyone becomes a real estate guru overnight. The word short sale comes from the financial industry. This applies to real estate when someone that holds a mortgage cannot satisfy the total amount owed. A mortgage lender or bank sells the property for a lesser amount that what was owed on the mortgage. The foreclosure surge in the U.S. is increasing the amount of short sales that are happening in every state. Learning the short sale definition and how it applies to your real estate investment company will help your career.
What Happens During a Short Sale
A short sale cannot take place without a homeowner going into default on the mortgage. Every state has different laws concerning the time period when a notice of default can be mailed. It is usually two or more missed payments. Banks and mortgage lenders have departments that handle all of the incoming and outgoing notice of default information for properties owned or co-owned. A homeowner that is notified that a foreclosure could be triggered is done so with a notice of default. This written record provides the foundation of an imminent foreclosure.
The default notice usually comes with a demand for a homeowner to settle up on the late mortgage payments. A typical period of time is given and it is usually 30 days or less. A homeowner can contact their lender and inquire about lowering the mortgage interest or other payment plans to help bring the mortgage current. This is known as a loan modification and it could help avoid the short sale process. A homeowner that cannot satisfy the missed payments will receive a notice of public auction within 90 days. The bank or lender will sell the property at a public auction.
Buying Short Sale Real Estate Properties
Real estate investors that are trying to buy their first property usually do so at an auction. Depending on the number of bidders, the price could be a lot lower that the assessed value of the home. A short sale is much different than a public auction. A homeowner that is facing auction can contact a third party buyer to submit a short sale offer to buy the home. Banks and lenders have veto approval for a short sale letter. If the offer is too low, it is likely to be rejected and the public auction can take place. A real estate investor that submits an accepted offer might find that a short sale price is much better than a price at auction.
Many companies that offer turnkey real estate property buy short sale properies. The ability to buy a home for a lesser amount and attach a tenant to it can be profitable for all involved. Starting out your real estate career is exciting and full of twists and turns. No one becomes an expert overnight. Learning about alternative ways to buy real estate like a short sale can help you build your portfolio of owned investment property.
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