How Do Short Sales Benefit Buyers?

Short sales offer reduced prices to patient buyers.

Short sales can offer benefits to lenders, sellers and buyers, but these benefits typically come at a price. Short sales are named for their lower prices, not the time it takes for the sale to be processed. If buyers have a long time to wait for a property or have found a house they truly want, then a short sale can be the perfect option.

Short Sales

A short sale is a combination between a regular property transaction and a foreclosure by the bank. The owner of the property makes a deal with the lender so that, instead of foreclosing, the property is immediately put up for sale. The money the seller receives from the sale goes to the lender to pay off the loan the seller is struggling with. In this sale a third party, the seller's lender, must certify every step of the selling process once a buyer is found.

Prices

The main benefit to buyers looking for a short sale is cost. Because the lender needs the house to sell to recoup their loan, and the seller needs the house to sell because the loan payments have become too costly, the goal is to attract as many buyers as possible. Prices for short sales are usually lower than other market rates.

Moving In

Foreclosures will occur if a short sale is not possible. If a foreclosure happens, the owner of the property who has defaulted on the loan may be angry and refuse to leave the property, or damage the property in some way. With a short sale, the seller is a willing participant and is much more likely to take care of the property and move out on time.

Less Competition

Short sales tend to take a long time, and in some markets this can ward off other buyers, especially buyers who need to buy a house quickly. This lowers the competition over the house, and makes it easier for interested buyers to get the property at market price or lower. Because the lender is in charge of many proceedings, the emotions of the sellers rarely cloud the issue or create problems with counteroffers.

Considerations

Short sales do take a long time, several months on average, and during this time other buyers may be attracted to the property so that bidding wars begin. Much of the short sale process depends on certification by the lender, who may not care about market conditions or the current value of the property. Buyers may be turned down if their offers do not meet lender expectations, even if they do meet the listing price for the house.

References

• AOL: Understanding Short Sales
• Active Rain: Buying A Short Sale Or A Foreclosure | Buyers Should Consider The Advantages and Disadvantages