List of Pros and Cons of Short Sale
The real estate market hasn’t been too good lately and as such a lot of people keep on struggling with a doubt on their mind: should they keep their house, or should they go with another option? A short sale is one of those other options to consider.
A short sale is one of the best possible options you can have when things get though. A short sale can get you out of debt without hurting your credit and typically banks don’t mind you doing it because they really don’t want to deal with another house on their books. In this article we are going to look at the pros and cons of short sale.
List of Pros of Short Sale
1. Price advantage for buyers
The biggest and most obvious advantage a buyer has when purchasing a short sales is that the home is going to be way below market value and, as such, it is possible for the buyer to save up some money on it on the purchase. The lender will have an appraisal to determine the market value of the house and then the bank is going to see at what percent of the current value of the house they are willing to accept a sale.
2. There isn’t as much competition
Even though short sales have been growing in popularity a lot of people still don’t trust that type of transaction and as such they just do everything they can to stay away from it. As such, the competition is going to be smaller and there are going to be less offers to deal with.
Nevertheless, it is always advisable to have a professional sales agent easy to deal with everything as there are always complications that arise and that need to be dealt with. Complications such as bank delays and logistical challenges can make a huge difference if they are not properly dealt with.
3. Disclosure protection for buyers
Buyers who decide to go with a foreclosed home can get a lot of complications as banks don’t need to provide disclosures on the current situation of the home that is being purchased. Since disclosures aren’t required, the buyer can than have to deal with damaged areas of the house, mold, infestations and other issues. When it comes to short sale properties, however, the buyer receives this type of information and as such he can make an informed and easy decision regarding the transaction.
4. The seller controls when he leaves his home
With foreclosure, a bank tells the person to leave the home until a certain day and, if the person doesn’t meet the deadline the bank is going to start an eviction process to get the person out of the home by “force”. With short sale, however, the person has a choice as to when he or she leaves the home.
5. The seller preserves his credit
Adding a foreclosure or bankruptcy to a credit report is going to damage it significantly and financially the seller is going to be marked for at least 7 long years. With short sale there is no bankruptcy or foreclosure to be filed and as such the damage done to the credit of the seller is minimal.
List of Cons of Short Sale
1. It is hard to find a buyer
Finding a willing buyer on a short sale is an incredibly hard thing to do. As said, people are still pretty hesitant when it comes to it and as such most buyers will try to stay away. On top of that, if you do find a buyer you are probably going to get a horrible offer at first and it might be hard to figure things out with the buyer when he appears.
2. The banks decide
After the offer has been done you are pretty much not going to have a choice, the bank is going to have it. After the offer has been made it is all up to the bank and that isn’t too good for the seller.
3. Tax liability
After the sale the government is going to look at the money you acquire a taxable income and that is going to be pretty though once you have to deal with it as you can get tax liability to deal with. Moreover, and even though it won’t affect your credit like foreclosure or bankruptcy, there is still a chance that it will have a negative impact on your credit if things aren’t handled properly during the whole process.
4. High risks
Short sales might sound easy but they aren’t and a lot of agents really don’t want to get involved as the skill and expertise required can be too great for them to want to commit. Finding an agent with proper expertise can be really, really tough but at the same time it is a key factor in determining whether or not the short sale is going to succeed.
5. Bank delays
As said, banks are the ones that are going to make a decision and as such they are probably going to take their sweet time doing so. This can lead to buyers backing off due to frustration and it can also lead to the occurrence of further complications with the property itself. Constant communication between the buyer and the seller are incredibly important and only an experienced short sale agent can guarantee this is going to happen.