Everything You Need to Know Before You Opt for Short Selling of Your Home

Short selling of a house especially in this pandemic become prevalent. There are various reasons in this process. The main reason is a financial shortage. However, the Short selling of a house is not short anymore. An owner of a house needs to short sell his house which is he or she borrowed on loan due to certain problems. In this article, we have discussed all the things related to the short selling of a house if you are an owner or a lender.

What is the technical definition of short selling?

As per the real estate language, shot sell is a process where a house owner sells his property less than the amount due,  to the lender in the form of a mortgage. In this process, an agreement is established between the homeowner and the lender to ignore the foreclosure, which also reduces the burden of loans. Due to some disputes in foreclosure processing, Saya Gold Avenue High Court came into the news. However, the consequences of short selling in the terms of finance and legal are less severe.

The process involved in short selling – sell house

People might deceive you by telling you the terminology of short selling. But short selling is not an instant process. Buyers, lenders, and owners need to do so much documentation before executing the process. The process is mainly divided into six steps which are mentioned below:

1) The homeowner must attend few financial questions and needs to submit a thorough document with a hardship letter which will elaborate why there is a necessity for this stand after that only he will be eligible for a short sale.

2) After that the lender needs to estimate the market value of the property and will send a valuation letter to the seller.

3)The house owner will hire a real estate agent to list the property for sale.

4) When the offer is met and the real estate agent submits the complete offer to the lender. Which include the financial background of the buyer, contract for purchasing, earnest money deposits, etc.

5) After that if the lender finds it appropriate he or she needs to approve the proposal and submit a counter offer.

6) After the successful agreement, the house owner and buyer must execute the selling process under the conditions of the lender.

The advantages of the short sale from the perspective of a buyer, a seller, and the lender.

1) The house owner can avoid the foreclosure procedure which is more complex and lengthy.

2) The seller’s credit scores are not impacted that much what a foreclosure can do.

3) The seller gets rid of loan obligations and can look for another home according to his or her budget.

4) Sometimes, the lender forgives the difference between the sale price and the mortgage amount by examining the financial condition of the seller, but not all the time.

5) For lenders it saves money and time which might cause huge in foreclosure procedures.

6) The lender does not think of selling the property itself and the concessions on the price of the house which is generally included during foreclosure auctions.

7) The buyer can get a good condition home below the market price.

8) The condition of the house is better than the houses the buyers get during foreclosure auctions.

9)  The house owner can stay in his or her house until one will complete the whole process of short selling.

Disadvantages of Short Selling

1) One of the foremost cause for which a House owner avoid short selling is its lengthy process. So it involves many factors in this process, such as getting approval for short selling, buyer’s eligibility criteria, and lender’s experience in this matter.

2) To start the short-selling process as we said above approval of the lender is a must. And as short selling Hampers the profit on loans so lenders are generally trying to avoid the scenario. Moreover, if more than one lien is in the property, the process becomes complex as the seller needs to take approval from all of the lenders.  And due to these lengthy and complex processes, Saya Gold Avenue Dispute was in the media for a long time. 

3) As in the short selling, the house owner sells his property due to a money crunch. So he or she can’t maintain the property’s conditions nor lenders do the concessions on maintenance costs as they already losing so much money. So they offer property as it is.

4) When you short sell your house and plan to buy another one with a new mortgage loan. It becomes difficult to convince a lender due to your lower credit scores.

Undoubtedly, Short selling impacts the owner’s credit scores but not as much as a foreclosure does. The buyers of the properties are third parties maximum time real estate companies, who are also in this process. As per the rules, no short selling will be taken in place without the consent of the buyer. A buyer needs to give approval to the lender(typically the bank) to start the short-selling process. A lot of money and time is involved in this process The lender needs to document everything,  explaining why this is necessary.

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