By all means, make offers on properties listed as short sales, but expect plenty of red tape and long delays by the lender. Lenders simply won’t accept less than market value in most cases. It represents one of the best ways to avoid foreclosure as a homeowner.Īs a buyer, it’s hard to score a great deal on short sales. The homeowner lists the property for sale with a real estate agent, and hopes a buyer comes along with an offer the bank will accept. But they can’t sell the property to pay off the loan, because they’re upside-down on their mortgage.Īfter appraising the property, the lender may agree to a short sale: accepting a lower payoff than the loan balance.
In a short sale, the homeowner contacts the lender and explains they can no longer afford the monthly payment. They then list it for sale with a real estate agent. These bank-owned properties are called “REO” properties, an acronym for “real estate owned” by the bank. Alternatively, if they fall several months behind on payments, the lender initiates the foreclosure process.Įventually the home goes to public auction, but most foreclosed homes don’t actually sell at auction, so the bank usually takes ownership. When mortgage borrowers first fall behind - or even before they default - they can contact their lender to discuss listing their home as a short sale. For $79 (or just $1.52 per week), join more than 1 million members and don't miss their upcoming stock picks. Motley Fool Stock Advisor recommendations have an average return of 618%.
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