When the economy is bad, more people cannot afford their mortgage payments and real estate short sales become more common. The idea of real estate short sales is quite new to most homeowners but it is not new to real estate investors. Real estate short sales benefit both the homeowners and the home buyers and maybe even the banks.
Real estate short sales are particularly useful for homeowners with upside down mortgages. When your mortgage is upside down, you will often receive many sales letters enticing you to do a real estate short sale. What an upside down mortgage mean is that you owe your bank more than your home is worth. For example, if your home is worth only $100,000 and you owe $120k or $130k in mortgages then you are upside down.
Homeowners with upside down mortgages have one solution left to them; Real estate short sales. For a home that is upside down, even if the homeowner were to sell it on the market, he or she wouldn’t make enough money to pay off the mortgage balance and will still owe the bank even when the home is gone. This can be a real financial burden on the homeowner. Many people in this situation end up filing bankruptcy.
Fortunately there are people, such as private investors, willing to do real estate short sales with the banks. Real estate short sales are homeowners’ only hope when the home is upside down. How real estate short sales work is that say Bob owes his bank $210,000 but his home is only worth $160,000. Then a real estate short sale is done for Bob and the bank accepts it. This frees Bob from all of his mortgage obligation. He wouldn’t have to pay the whole $210,000.
The drawback is that Bob will no longer be able to reside in his home. Although, real estate short sales save Bob from having to pay out of his own pocket and even save his credit, the real estate short sales do not save Bob from having to move out of his home. The real estate short sales are always done by third party buyers. The banks are particular about not letting homeowners stay in their home to avoid them pretending that they could not afford the mortgage payments when they could.
In order for real estate short sales to be accepted, there must be third party buyers who convince the lenders that the homeowners cannot afford to pay what they owe. This often includes proving that the homeowners are in bad financial situations such as loss of jobs, medical bills, and divorces. Many convincing letters will need to be sent to the banks.
Real estate short sales are not always successful. Sometimes, real estate short sales are not accepted by the banks. This may be because the buyers and the homeowners have not given enough proof that the situations are bad enough. Sometimes, the banks feel that they can do better auctioning the homes off in foreclosure sales instead of going ahead with the real estate short sales.
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