Short sales are usually not the first choice of a homeowner experiencing mortgage debt. Many people are surprised to find out that a lender isn’t usually a big advocate either. However, in today’s housing market a short sale is becoming the better alternative to foreclosure when all else fails.
The Lender’s Stake
While it is true that the homeowner loses a lot in either a foreclosure or short sale, the lender also suffers. Losing their stake in the loan, responsible for carrying costs and forced into responsibility over a home they had no intention of owning, they are often left holding a bag of burden when a home enters foreclosure.
In a short sale, the lender can minimize their risks of losing their profits from the loan and often have very little responsibility in the sale of the home. Since the lender can often escape a bad situation more easily in a short sale, it tends to make them pickier when it comes to accepting offers on the home. Lenders generally want one thing out of a short sale, the maximum amount for the home. Already risking profits and possibly taking a loss on the loan, lenders of a short sale are often very strict when accepting offers. A lender is most likely to accept an offer that is:
- Above asking price or fair market value
- Free of financing conditions
- Void of any closing cost assistance
- Conditional based on an as-is condition