The recent economic recession saw many layoffs, bankruptcies, foreclosures, and insolvencies. A sharp rise in the amount of short sales was also observed. A short sale is an alternative to foreclosure and bankruptcy. When a person realizes that he/she is falling behind the installment schedule of a loan repayment, he may approach the lender with a financial hardship letter. In such a situation, the lender may give consent for a short sale. If the consent is given, then the borrower can sell the mortgaged property at a price that is lower than that of the mortgage cost (principal amount that is borrowed, plus interest). The loss is incurred by the lender and is written-off.
In purchase of such a property, one can save a lot of money. The costs that one would not have to bear include excessive inflated profits, real estate appraisal, profit margin of the seller, and interest amount of a mortgage loan. The complete process is time-consuming, and it may require 2 months to complete the proceedings after the appropriate property or a seller has been identified.
Approaching a Broker
One can approach a real estate broker to know about properties available on short sale. There is also a possibility that one might have to approach more than one broker. This might take more than a few days. Even if the broker finds a property, it is advisable to look for more than one property, as it can deliver better results, especially when it comes to a short sale.
You need to look at the property, 1099-C Tax Form, and all the lien documents of the property. It must be noted that the property was once a collateral pledged to a lender who held the 'lien', which is also called the right to ownership of the house. Hence, one must make sure that the property has been discharged and the lender no longer holds a right over it. There could be two mortgages on a single real estate or home equity loans, and hence, care should be taken while dealing with such properties.
Consulting a Lawyer
When buying a real estate by short sale, the transfer of lien and all ownership rights are transferred from the seller and the lender to the buyer. Hence, unlike an ordinary sale of property, one will have to undertake the filings of many documents and closing rights. It must be noted that, the closing costs that would be incurred during these proceedings are substantial. In addition to it, one will have to file documents with the local governing body, and pay property taxes. This filing will indicate the new owner of the property, and the registers that are maintained by the local governing body will also be updated accordingly. Getting the acknowledgment, or change in registers, and property tax forms from the government will eventually complete the entire process.
As mentioned earlier, the process is long and tedious. In order to have a completely error free, legal, and swift purchase, the buyer can consult a real estate attorney and the local governing body even before a purchase of such property. With the help of a lawyer, one can make a list of the forms, filings, taxes, and compliances that would have to be completed. An error can result into a disaster.