What Is a Short Sale under Contract
A short sale under contract is a real estate transaction that occurs when a homeowner owes more on their mortgage than the current market value of their home. In this situation, the homeowner is unable to sell the property for the full amount owed on the mortgage, so they negotiate with their lender to accept a lower payoff amount.
Once the lender agrees to a short sale, the homeowner can put the property on the market. When a potential buyer makes an offer, it`s subject to lender approval. If the lender accepts the offer, the sale is considered « under contract. »
Short sale contracts can take longer to close than traditional real estate transactions, as the lender must approve all terms and conditions of the sale. Additionally, the lender will require a detailed financial statement from the seller, including documentation of their hardship. Hardship examples could include loss of employment, a medical emergency, or a divorce.
In some cases, the seller may receive a deficiency judgment from the lender, which means that they`re still responsible for paying the difference between the sale price and the total amount owed on the mortgage. However, some states have anti-deficiency laws that protect sellers from this type of judgment.
For buyers, a short sale under contract can be an opportunity to purchase a property at a reduced price. However, it`s important to understand the potential risks involved, such as the uncertainty of obtaining lender approval and the potential for a lengthy closing process. It`s also crucial to work with an experienced real estate agent who is familiar with the short sale process.
In conclusion, a short sale under contract is a real estate transaction that occurs when a homeowner owes more on their mortgage than the current market value of their home. It involves negotiations between the homeowner and the lender, and the sale is subject to lender approval. While it can present opportunities for buyers, it`s important to carefully consider the potential risks involved and work with an experienced real estate professional.