Short Sales
The 2017 NAR® Investment & Vacation Home Buyers Survey also looked at how many investors bought properties through short sales: 17%. A short sale occurs when the buyer purchases a property for less than what’s still owed on the mortgage. The lender must approve of the transaction. They usually do this when the seller is going through a hardship (divorce, health problems, job loss, etc.), and the home doesn’t have enough equity to cover the balance of the mortgage, especially when factoring in sale costs. Part of the process of short sales is that sellers must give the bank their financials. What exactly this entails varies between banks, but the process tends to be comparable. Why would lenders be okay with getting less than they’re owed? Because the loss they take in short sales can be less than the loss they’d take if the home went into foreclosure. Plus, they won’t have to deal with marketing and selling the property. Just so it’s clear, this doesn’t mean you’ll get the deal of the century on a short sale. Lenders still want to get the most they can! (Wouldn’t you?) Overall, short sales are good for everyone. Investors get a good deal, lenders get a significant amount of money without having to deal with the foreclosure/REO process, and homeowners don’t get foreclosed on, which can tank their credit score.
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