A short sale may allow you to purchase a home for less than you would pay on the traditional market. To do so, you simply offer to buy out the loan for less than that loan is still worth. This often happens when the alternative is a foreclosure.
For instance, someone may purchase a house for $300,000, but then he or she may find that the home is not really affordable for a variety of reasons, such as unemployment and the loss of a career. As a result, that person may stop paying entirely and be threatened by the bank with a foreclosure.
You can then step in and tell the bank that you’d like to buy the house, but you’re only willing to pay $230,000. Banks will not always accept this but if they do, you get the home for $70,000 less than the previous owner, meaning you’ve gotten a tremendous deal. Though the process can be long, people in Texas are sometimes willing to wait it out for such significant savings.
So, why will the bank accept less than is owed? Quite simply, the bank is going to lose money with a foreclosure anyway. That process can be even longer, and every month without a payment is money lost. The bank then has to invest even more time and money in trying to sell the home, after putting a lot of time and money into foreclosing on it. The short sale is not ideal, but it’s often easier and more attractive to the lender, and it ensures that the home is sold again very quickly.
As noted, short sales are long and complex, so be sure you know what you must do from a legal perspective.
Source: Foreclosure.com, “Real Estate Short Sales,” accessed April. 20, 2015
