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Short Sale Austin: How Does it Work?

Posted by Ryan Rodenbeck on Friday, April 24th, 2020 at 10:00am

A short sale is when a homeowner sells their property for less than the amount owed on the mortgage for where the lender is willing to accept less than the amount that is owed on the mortgage.

Let's say you're in a situation where you recently bought a home for $300,000 and you placed a 20% down payment. The other 80% is from your lender and you pay it off monthly including the interest. But what if something unfortunate happens such as losing your job, or your partner losing your job, or you're having difficulty paying it?

This is where you can ideally make use of a short sale where you can thoroughly vet the options and avoid having a foreclosure.

 

How does a Short Sale work?

Here are the steps on the process of a Short Sale in Austin:

For a short sale to take place, it's ideal that the home must be worth less than the amount the homeowners owe. Home sellers can expect to file several documents to their mortgage lender as proof of being unable to pay your mortgage payments. A hardship letter and the filing of records such as tax returns, payment stubs, bank statements, that will back your case on being unable to repay your home loan.

The homeowner will first talk to a real estate agent and their lender on selling their house via short sale. The homeowner will then work with the real estate agent to list the property. Once a buyer is interested, a sales contract will be executed, however, this will be subject to the lender's approval.

Once the lender reviews the offer, there is no guarantee that the lender will give you a green light. They could either approve the offer, reject it, there would also be instances that they would reject but outline the terms they agree to. The response will then be presented to the potential buyer, this is where the contract could stay the same or the buyer could reject the lender's terms.

If the contract gets approved, the short sale property will head to closing and the home will be transferred to the new buyer. The lender will receive all the proceeds from the property sale and release the homeowner from their mortgage loan.

 

Short Sale vs Foreclosure

The process of foreclosure can be long and stressful. It can also be damaging to the homeowner's credit and assets. This may also not be a good option for as it could be very hard to get any type of loan in the future.

In a short sale, the homeowner takes place, initiates the sale of their house; compared to a foreclosure which initiated by a lender, where the bank takes ownership of the home after the buyer is unable to make payments.

Due to the effects of foreclosure to your credit, it can take up to seven years before you can obtain another mortgage loan. Even renting a home or buying a car could give you a difficult time versus a short sale which can typically cause you to wait for at least two years. 

 

Buying a Short Sale Home in Austin

Homebuyers can take advantage of what a short sale can offer. If you are going to buy a short sale property despite the benefits, know that there could encounter any issues during the process.

1. Unpredictable Timeline

A Short Sale won't take a "short" time. Since the lender will have to approve the contract, it can take weeks or months before you will be able to know that the offer is accepted. The property can even end up on escrow for months. There is no certain time of how long the process will take as the terms and the contract will be up to the lender.

2. Lender Price

The lender could get directly involved in the negotiation of the home price in order to recoup more on the home loan.

3. Buying the House as-is

Since the lender has the wheel on their hands, you may not be able to ask for repairs, unlike a traditional home purchase. The buyer may be unable to negotiate the price but could get a home inspection to know what they are getting for as they purchase the home. Never miss a home inspection when it comes to purchasing a short sale property.

4. Less Competition

Purchasing a short sale could result in plenty of complexities during the process whereas many may not want to get involved. Because of that, there could be fewer potential home buyers of a short sale home as they repel from a transaction.

 

Speak to a Consultant!

Are you considering purchasing a short sale home in Austin? Interested to know more information about the short sale homes for sale in Austin? Speak to one of our consultants today that will navigate you through the process of a short sale!

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