A short sale is a term used in the real estate industry to describe the situation in which a lender agrees to sell the home of the property owner (the borrower) at a discounted price that is less then what is owed on the property. In other words, a short sale happens when prevention of foreclosure is wanted and the bank agrees that the owner can sell the mortgaged property at a price less than its mortgage balance. Proceeds from sale then go to the borrower.
People mostly see that by buying on a short sale is like getting a great deal amongst others but this is not always the case. Although purchasing a short sale is often a great way to purchase real estate, many times, due to the real estate market going through a downturn, you can purchase a home and still experience a reduction in value.
There are disadvantages when one wants to go into a short sale. For one, the typical process takes longer because transactions are done directly with the bank and must gain their approval to sell the home. It is a bit complicated as it is not as common as a regular real estate transaction. Also, when a client makes an offer to purchase a real estate short sale they do not have the benefit of getting a quick response like they would from a regular seller.
The approval process for a short sale is the exact opposite of what a borrower goes through when they are trying to obtain financing. A seller must be able to present to the bank all possible proof that they did every attempt possible to try and make the payments.
San Diego is an area that has experienced a large increase in home values over the last few years. As a result, San Diego short sales of homes increased and the real estate market is going through a correction or cooling off phase where we can see home values come down which can result in the home being worth less than the mortgage balance.
As a result of someone not being able to make their payments, it created a “short-sale” and the bank approved it at less than its mortgage balance. San Diego foreclosure proceedings usually begin after a borrower has skipped three mortgage payments. The lender will record a notice of default against the property. Unless the debt is satisfied, the lender will foreclose on the mortgage and proceed to set up a trustee sale.
The process of buying directly at a legal foreclosure sale is risky and dangerous, plus it has many disadvantages. There is no financing to support this so we are looking buying on a cash basis. Another precaution to take is that the title needs to be checked before the purchase or the buyer could end up with a seriously deficient title.
The property’s condition is not well known and an interior inspection of the property may not be possible before the sale. In addition, only estate (probate) and foreclosure sales are exempt from some states’ disclosure laws. In both cases, the law protects the seller (usually an heir or financial institution) who has recently acquired the property through adverse circumstances and may have little or no direct information about it.
Most residents know that there is no shortage of San Diego foreclosures. In this real estate market, buyers can get a great deal if they just look for any one of the San Diego short sales for sale.
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