Category Archives: Real Estate Glossary

Considering a Short Sale? Here’s what you need to know.

 

In Atlanta’s real estate market today, short sales and foreclosures make up about half of all real estate transactions. In fact, short sales represent a significant portion of real estate sales activity in Atlanta and are becoming increasingly more common than foreclosures. Though they require a bit more red tape than a normal real estate sale, short sales can benefit all parties if they are all willing to make some sort of compromise.

First, let me explain what is a short sale anyway. When a homeowner sells a home for less than the amount of money owed on the mortgage of that home, that sale is called a short sale. Sometimes, you might hear people refer to it as pre-foreclosure. In most cases, the homeowner has fallen behind on mortgage payments and cannot afford to continue making mortgage payments on the home. Instead of waiting until the lender decides to repossess the property, the homeowner will petition to sell the house for less than the amount owed on the mortgage. In some cases, the lender will even forgive the portion of the mortgage loan not covered by the selling price. Even though foreclosures and short sales negatively affect seller’s credit score, the damage incurred from a short sale can be mitigated if the seller can convince the lender to report the debt as “paid in full.”

For the lender, short selling a property is a lot less hassle and a lot less paperwork than taking on a foreclosed property. They are just as tired of foreclosures as the rest of the population. A short sale transaction benefits them in that they don’t have to deal with selling a property that has been vacant for a while and most likely needs repairs. The lenders are the shot callers in the short sale process and are the ones who set the selling price.

It’s unfortunate for the sellers and the lenders that these homes are selling at depressed price levels. For buyers, it’s a deal. Even though a real estate short sale can still take months to have a decision made by a lender, buyers still get a deal on a property that will most often require less work than a foreclosure.

If you’re in the market for a home in the Atlanta area and are considering a short sale, here is a list of things you want to consider before you jump in head first.

Understand what you’re getting yourself into. Short sales take a while to close and can involve extra effort on the buyer’s part. Save yourself time and unnecessary stress by getting disclosures up front.

This is not a DIY project. As I mentioned before, short sales come with a lot of red tape. It’s imperative to work with a real estate agent on the Go Getter Team who knows the territory and is able to navigate you to a successful close.

Know the condition of the property. In a rush to get rid of the property, sellers may not always be so forthcoming with unfavorable information about the condition of the property. It’s important to have the property professionally inspected before you commit. The Go Getter Team has a list of knowledgeable real estate inspectors on our Preferred Service Providers List.

Be sure the sale has a prayer of closing. Since lenders generally approve of short sales based on the seller’s financial situation, the sadder the story, the better. Most lenders require a letter of hardship, proof of income and assets, a comparative market analysis and a list of liens to consider approval of a short sale.

Be realistic. If you are in a hurry to purchase a home, do not consider a short sale. It’s definitely a waiting game. If you do decide to go for the short sale home purchase, make a reasonable offer that the lender will actually entertain. Lastly, be realistic about where closing costs are coming from. In these cases, cash is the greatest financing alternative for buying a short sale in Atlanta.

What are the short sale tips you’d like to share?

 

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Filed under Information for Buyers, Information for Investors, Information for Sellers, Real Estate, Real Estate Glossary

Real Estate Glossary:

Maturity– The date on which the principal balance or amount of a financial/debt instrument becomes due to be paid and payable. Examples of financial instruments that have a maturity date are:

-Loans

-Bonds

-Notes

-Acceptance bonds

-Drafts

The maturity date informs the investor/lender of how long interest payments will be received and at what date the principal is expected to be paid in full.

For homebuyers, when you take out a mortgage loan you’re responsible to pay your investor/lender an assured amount of money every month for an agreed period of time. After the full amount is paid back as promised, the loan matures and the interest payments discontinue. When the maturity date is reached, the principal is paid back in full and the debt is completely satisfied, your lender will no longer have a claim on your property that you now own.

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Real Estate Glossary: Co-Borrower

A Co-Borrower is an additional individual who is both obligated on the loan (or mortgage) and is on title to the property. Co-Borrowers are also required to be on all real estate documents so that the transaction can be closed. Some buyers may opt to have a co-borrower because:

a) they are married or partners

b) they are in business together

c) they are family members

d) they need a co-borrower to qualify for the loan application

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Real Estate Glossary: Fair Market Value

Fair Market Value

The highest monetary price that a property would bring, if offered for sale for a reasonable period of time in a competitive market, to a seller who is willing but not compelled to sell. The buyer must be willing but not compelled to buy. And both parties are fully informed of all the purposes to which the property is best adapted and is capable of being used. Fair market value is often used in annual tax assessments done for county tax purposes.

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Real Estate Glossary: Delinquency

A delinquency results when a home owner has failed to make mortgage payments when mortgage payments are due. For most mortgages, payments are due on the first day of the month. Many lenders may not charge a “late fee” until after the 14th day of each month. Even though this is the case, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus.

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Real Estate Glossary: Closing Costs

Closings costs are typically paid at the time a Buyer purchases a home.
The costs are separated into two categories:
Non-recurring closing costs
Pre-paid items
Non-recurring closing costs are any items paid just once as a result of buying the property or obtaining a loan.
Pre-paids are items that recur over time (i.e. property taxes and homeowners insurance). A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within 3 days of receiving a home loan application.

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Real Estate Glossary: Tax Lien

Real Estate Glossary: Tax Lien

A Tax Lien is the claim against a property with unpaid taxes. While a tax lien is on the property, the property cannot be sold because the title is not clear. Over time, the property can be foreclosed on when the taxes are not paid. Many states have specific laws around the tax lien process, but over time many states will absolve the debt by auctioning the property in question at county courthouses. Request more information about tax liens.

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