by Emily Beach
Short-sale properties can often be a bargain for buyers.
Foreclosure can be devastating to a homeowner and come at a high cost to the lender. The lender must pay all costs associated with the foreclosure, including those associated with evicting the current owner, as well as any administrative costs. Once the house is empty, the lender must then pay for any repairs and maintenance costs while the house is on the market. To avoid paying these expenses, lenders may agree to sell the property for well under the value of the loan. This presents an opportunity for buyers to secure a great deal on a home they would otherwise be unable to afford. According to Realty Times, many short sales require the buyer to perform some maintenance and repairs. In a traditional home sale, the seller would pay for these repairs ahead of time. In short sales, this generally isn't the case. Because many short sale properties are fixer-uppers, buyers can often score an excellent price if they're willing to do the work, or pay for it themselves.
Favorable Financing Terms
Even though a short sale requires the bank to agree to sell the home for less than the value of the current loan, short sales often represent the most cost-effective option for the bank. Typically, the
current owner of the property must be several payments behind before a bank agrees to consider a short sale. In this type of situation, the bank agents know that the current owner likely has insufficient resources to pay his obligations. Rather than continue to receive no money on the property, the bank is often eager to sell the home at a short sale, which can help the lender recoup at least some of the loan costs. While the bank has the option of foreclosing on a delinquent property rather than approving a short sale, foreclosure comes with its own disadvantages for the lender. Banks know that foreclosing on a property will cost them even more money in terms of eviction and administrative costs. They may also be faced with expenses related to fixing up the property to prepare it for resale. Even after a foreclosure, the bank knows there is no guarantee that the property will sell. An empty bank-owned property leaves the lender faced with maintenance expenses each month until a seller can be found. Rather than continue losing money, or wasting more money on a foreclosure, many banks offer buyers of short-sale properties favorable financing terms to make the sale more attractive. The lender may offer a low interest rate or other buyer-friendly terms to get the property sold and avoid further expenses.
Cooperation from Homeowners