Short sale how many years

The lender must approve the short sale before it happens. The process of a short sale can often take as long as a year due to the scale of paperwork involved. In a short sale, the process is initiated by the homeowner. The owner will illustrate to the lender the extent of their financial distress through documents that may show a recent loss of employment, divorce decree, or bank statements.

After the lender agrees to move forward, the homeowner is responsible for finding a buyer. In a foreclosure, the lender initiates the process, essentially seizing the home after the owner has failed to make payments.

The foreclosure process is generally faster than a short sale, as the lender seeks to liquidate the assets as quickly as possible. In many cases, buying a short-sale property can be advantageous for prospective buyers. However, it is important to be aware of some of the drawbacks involved.

Short sales can take a long time, with lenders sometimes taking months to approve the transaction. After the seller's approval, it may also take many weeks for the bank to approve the price. If the bank believes that a foreclosure proceeding is more lucrative, it may reject the short sale and move forward with foreclosure instead. A short-sale property can provide an excellent opportunity to purchase a house for less money.

In many cases, short-sale homes are in reasonable condition, and while the purchase price might be higher than a foreclosure, the costs of making the home marketable can be much lower, and the disadvantages to the seller less severe. However, because of the lengthy process, buyers and sellers must be willing to wait. An experienced real estate agent can help you determine a fair offer and negotiate with the bank.

While many investors purchase short-sale properties and quickly resell them for a profit, others choose to maintain ownership and use the property for income by collecting rent. In either case, each property must be carefully evaluated prior to purchase to determine if it has profit potential. Because tax laws are complicated and constantly change, it is always recommended that you consult with a certified public accountant CPA who knows about real estate investing and related tax laws to give you comprehensive and up-to-date information.

It can mean the difference between making a profit and taking a loss on an investment. Freddie Mac. Fair Isaac Corporation. Rocket Mortgage. A Guide To The Process. National Association of Realtors. Purchasing A Home. Home Ownership.

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Table of Contents Expand. What Is a Short Sale? Understanding a Short Sale. Special Considerations. Short Sale vs. Short Sale Alternatives. Details of a Short Sale. Short Sale Strategies. The Bottom Line. Key Takeaways A short sale in real estate is one in which a house is sold for a price that is less than the amount still owed on the mortgage. It is up to the mortgage lender to approve a short sale. The difference between the sale price and the mortgage amount may be forgiven by the lender, but not always.

The financial consequences of a short sale are less severe for the seller than those of a foreclosure. It's important for the buyer to calculate costs and be sure there is room for profit when the house is resold.

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Step 5: If the contract is approved, the short sale property closes and the home is transferred to the new buyer. The lender receives all proceeds from the sale of the property and releases the original homeowner from their mortgage loan—even though the full mortgage balance was not paid off by the proceeds.

Before placing an offer on a short sale property, work with your real estate agent to do investigative work on the property. Your agent can check public records to see how much money the homeowner still owes on the mortgage. Between that and the comparable properties in the area, your agent should be able to give you good advice about making an offer. You may be tempted to waive the inspection when buying a short sale to speed up the process, but that would be a big mistake.

You should always hire a professional home inspector to evaluate the home. Buying a house without a proper inspection can be disastrous.

The only benefit to the lender is that a short sale is faster and less expensive for them than a foreclosure. If a homeowner is considering a short sale, things have gotten bad. For them, a short sale means losing their home without a profit. Plus, they also have to endure the emotional stress of convincing the lender to allow them to do it. Selling a house through the short sale process is never ideal; the only reason a homeowner would want to do it is to avoid foreclosure.

The homeowner must:. In order for a short sale to take place, both the lender and the homeowner have to be willing to sell the house at a loss. The homeowner will make no profit, and the lender will actually lose money for selling the house for less than the amount owed.

A short sale is not a do-it-yourself deal. Deciding if a short sale property is right for you depends on your specific situation and the details of the property. One thing is certain, though: If you want to buy a short sale property, in most cases you need to be prepared for a lengthy, complicated process.