Quick Sale Property To Buy
Mortgages fall into danger of foreclosure for many reasons, including borrowers' distressed finances. However, there's a step before foreclosure that can prevent it from even occurring. Known as a "quick sale," it's the sale of a property that's in its defaulted mortgage's preforeclosure period. Peforeclosure is the time between mortgage default and foreclosure sale and is really a lender's grace period for borrowers. Speedy sales of homes in preforeclosure are called "quick sales."
quick sale property to buy
Mortgage quick sales are fortunate events for defaulting mortgage borrowers because they head off actual foreclosure. State laws requiring mortgage lenders to follow legal processes when borrowers default frequently create mortgage quick sale periods. In most states, it can take mortgage lenders several weeks to several months to foreclose defaulted mortgages, which is why preforeclosure arises. Mortgage quick sales are also designed to reap enough in sale proceeds to completely pay off defaulting borrowers' mortgages.
In most states, defaulting mortgage borrowers are served with notices of default that clear the way for foreclosure. Typically, at least 90 days elapse between notice of default and foreclosure sale of a borrower's property. Most mortgage quick sales occur in the 90-day window. Ninety days is a relatively short time to market and sell a property, but it can be done.
Defaulting mortgage borrowers must have substantial equity in their properties for quick sales to work. A mortgage quick sale is intended to create the most favorable conditions for a mortgaged property's sale by offering it for below-market prices. Property owners using quick sales usually forgo the opportunity to reap any profit from the equity that their properties have accumulated. Mortgage quick sales typically result in steep discounts on properties being sold so that their mortgage borrowers can avoid foreclosure.
Banks and other mortgage lenders holding onto foreclosed properties also engage in quick sales. Usually, a bank or other lender not wanting to hold onto a property sitting in its "real estate-owned," or REO, inventory will discount it for a quick sale. However, property investor interest surrounding many lenders' REO inventories may be high, and well-financed investors tend to buy up those properties when offered. Remember, too, that foreclosed properties may come with their own maintenance and upkeep issues.
Mortgage quick sales shouldn't be confused with mortgage short sales. A mortgage short sale occurs when a property is sold for less than is owed on its mortgage. Also, property short sales can only be conducted with the permission of the lenders holding the mortgages on those properties. Fortunately, mortgage lenders will approve short sales during preforeclosure. Keep in mind, however, that mortgage short sales come with potential negative credit consequences that can be as bad as foreclosures themselves.
Tony Guerra served more than 20 years in the U.S. Navy. He also spent seven years as an airline operations manager. Guerra is a former realtor, real-estate salesperson, associate broker and real-estate education instructor. He holds a master's degree in management and a bachelor's degree in interdisciplinary studies.
4. Selling through the open market. In most instances you will get a better deal by selling on the open market either with a traditional high street estate agent; you could try speeding up the sale by using multiple estate agents. Estate agents take their fee on completion of the sale so there are no upfront costs to you and they are incentivised to make the sale quickly. Or you may consider using an online estate agent which typically charge much lower fees, but charge hem upfront. You might find the amount you need to drop the price by is less than the 20%-25% discount a quick sale company would usually ask for. You can also sell your home yourself through private sale.
There are lots of things you can do to speed up the sale of a property, such as instructing your conveyancer before putting your house on the market and making sure you respond to all queries and fill out all the required paperwork without delay. Find out more in our guide on How to speed up conveyancing.
Overall, there are a lot of misunderstandings around short sales. But one common misconception is that lenders just want to be rid of the property and will move quickly to get as much money back as possible.
Potential buyers will deal with the home sellers during the short sale process, but all of the details around the process must be reviewed and approved by the lender. The short sale cannot happen unless the lender approves it.
On the other hand, in a foreclosure situation, the bank takes ownership of the home after the buyer is unable to make payments. This process is initiated by the lender. The lender will force the sale of the home in order to try to recover as close to the original loan amount as possible.
Most foreclosed homes have already been abandoned, but if the homeowners are still living in the house, the lender will evict them during the foreclosure process. The lender will then attempt to sell the property either through an auction or through a real estate agent.
For homeowners, a short sale is typically preferable to a foreclosure for two reasons. First, a short sale is voluntary (while a foreclosure is forced). Secondly, after a foreclosure, most people are required to wait a standard seven years before obtaining another mortgage loan (while a short sale may cause you to wait for at least two years).(1)
Most lenders would prefer a short sale to a foreclosure process because it allows them to recoup as much of the original loan as possible without a costly legal process. In fact, in most cases a homeowner and lender will only pursue a foreclosure after an attempt to sell the home through a short sale process.
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.
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.
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.
Need help finding an expert? Our Endorsed Local Provider program can help you find top-rated real estate agents in your area. As you interview them to find the best fit for you, make sure to ask about their experience with short sales. With the right real estate agent, you can navigate the short sale process with confidence!
As more homeowners exit forbearance, some will fall behind on their mortgages and many local markets will see a rise in distressed sale properties. The flow of distressed sales is expected to be a fraction of those during the Great Recession, but nonetheless, REALTORS will need to develop new skills to respond on behalf of their clients and their communities.
A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.
NAR continues to push the lending industry to improve the process for approving and expediting short sales. In a direct response to REALTOR concerns, the Treasury Department developed the Home Affordable Foreclosure Avoidance Program (HAFA), to establish uniform procedures, forms, and deadlines for short sales. The development of the HAFA program pushed both Fannie Mae and Freddie Mac, as well as a number of large servicers, to implement standardized processes and procedures to improve the speed and efficiency of short sale transactions.
Though there have been many improvements, many members still reiterate that short sales continue to be delayed and servicers often hold unrealistic views of current home values. Often time the result is having a potential buyer cancel the contract and the property going into foreclosure. Enormous amounts of time are spent on potential short sales that result in foreclosures. Even if successful, the process usually takes many months and countless hours and often requires re-marketing because buyers lose patience and terminate the contract. Maintaining a focus on streamlining short sales will reduce the amount of time it takes to sell the property, improve the likelihood the transaction will close, and reduce the number of foreclosures. This will benefit the lender, the seller, the buyer, the community.
NAR strongly supported the implementation of the HAFA program and continues to call for improvement of other short sales programs to make them feasible. NAR believes lenders should adopt best practices learned from HAFA principles including identifying the required net proceeds, and approvable closing costs, up front to reduce delays in approving the transaction once a sales contract is executed.
The improvements to the short sale process helped stabilize the housing market during the Great Recession by providing additional options for responsible homeowners to avoid foreclosure. In turn, this allowed homeowners to avoid the foreclosure process and neighborhoods to avoid the blight of vacant foreclosed properties. 041b061a72