What is a Short Sale? | Short Sales Definition
A short sales definition is best described as a sale of real estate by which the sale total falls short of the balance owed on the home’s mortgage. This often happens when a buyer cannot repay the home loan on their house, however the financial institution decides that offering the house at a reasonable loss is better than foreclosing on the home owner. Typically, the only technique to selling a house with little or no equity (and preventing a potential foreclosure) is by short selling the house to an investor or end-buyer.
Short Sales Definition | How does it work?
A Short Sale usually consists of an investor (buyer), working with the homeowner to negotiate with the homeowner’s mortgage company. The motive of these negotiations should be to delay an approaching public auction and also negotiate a reduced payoff for the home mortgage (or mortgages). Utilizing this kind of solution, the property or home might be purchased for a lower amount than is owed and a home foreclosure can be avoided.
Short Sales Definition | Who should short sell?
How do you determine if a short sale needs to be done on a home? Below are a few simple steps for determining whether or not a short sale is a viable option.
- Determine your property’s value – To know if your property is upside down or if there is enough equity in your home you will need to figure out what your house is worth. Typically you can have a REALTOR or real estate broker look at comparables (comps) to get an idea of what your home is worth in today’s market.
- Add in closing costs – Once you have determined how much your home would go for, you will need to subtract the REALTOR commissions, closing costs, seller concessions, and possibly repair costs from the estimated property value. This number can be as high as 15% of the total value of your home.
- Calculate your equity– By taking your home’s current market value and subtracting the closing costs listed about you will arrive with a number that you would be walking away with if you were to sell your home with a REALTOR. Now, take that number and subtract the amount that is owed on your mortgage (or mortgages) and any other liens on the property. This is your equity. If it is positive, congratulations! If the number is negative then that number is the amount you would have to pay at closing to sell your home with a REALTOR right now.
- Figure out your financial situation – If you are already behind on payments or will be soon and you have no equity or negative equity on the home then you are likely a good candidate for a short sale.
Phill Grove has conducted approximately $200M in real estate transactions – using non-traditional investing methods such as mortgage assignment, short sales, equity partnering, auction-options, wraps, swaps, and other methods – many of which he invented and/or pioneered for the industry. Phill has invented a new strategy called the Mortgage Assignment Profits System. Phill Grove has personally trained and coached hundreds of Real Estate Investors on the “12 Ways to Buy and Sell Real Estate”, as well as marketing and lead processing strategies that actually work. Find out more about Phill at http://www.REIMaverick.com