What are Hollywood Short Sales on Real Estate Properties?

What Is a Short Sale in Real Estate Investing? | Mashvisor

Short sales (SS) in the real estate industry are offers of properties at asking prices that are less than the amount due on current owners’ mortgages. Short sales are usually signs of financially distressed property owners who need to sell their real estate before lending firms seize it in foreclosures.

The proceeds of this process will go to the lending firm. Financial institutions, then have options – to absolve the remaining balance or pursue the deficiency judgment that needs the former property owner to pay the financial institution part or all of the difference. In some areas, the price difference needs to be forgiven.

What is a short sale?

This thing usually happens when a property owner is in financial difficulty and has missed monthly amortizations. Repossession procedures may be just on the horizon. This thing is more likely to happen when the market is in a downtime like the 2008 housing bubble, which caused house prices to dive down and sales to slow down in most areas of the country.

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For instance, if the real estate value drops, the homeowner may end up selling their house for one hundred fifty thousand dollars when there is still one hundred seventy-five thousand dollars remaining to be paid on the loan. The difference of twenty-five thousand dollars (minus the closing cost and other selling charges) is called the deficiency.

Lending firm sign-off

Before the procedure can begin, the financial institution needs to sign off on the decision to execute the short sale; sometimes, it is called a pre-foreclosure sale. The financial institution, usually conventional banks, needs the loan holder to submit documents explaining why the process makes a lot of sense.

No sales can happen without the financial institution’s prior approval. This process tends to be paper-intensive and long transactions, taking up at least a year to process. They are not as harmful to the owner’s credit rating or history as repossessions.

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Special considerations

Short sales can hurt a person’s credit history and score less than foreclosures, but it is still a bad credit mark. Any kind of real estate property sale that is denoted by credit firms as not paid as agreed upon is a mark on the person’s score.

Repossessions, deeds-in-lieu of foreclosures, and SSs can hurt people’s credit ratings at some point and to some degree. SSs do not always nullify or invalidate the remaining loan debt. There are two parts of a housing loan. The first are liens against properties that are used to secure debentures. These liens protect lending firms in case borrowers cannot repay the debenture.

It gives financial institutions the right to sell properties as a form of payment. This part of the housing loan is waived in a SS. The second part of the housing loan is the promise to pay back the debenture. Financial institutions can still enforce this part either through collections of deficiencies or new notes. In any instance, the lending firm needs to approve the SS. It means people’s futures are usually in their hands.

How short sales work?

Distressed homeowners usually get to stay in their homes during the process. Property owners who have gone through Hollywood short sales may, with some restrictions, be eligible to buy another house immediately. While foreclosures usually let people walk away from their houses, completing this kind of sale is labor-intensive. But the payoff for the additional work involved in the process may be worth it.

How do foreclosures work?

In foreclosures, lending companies seize properties after borrowers fail to make regular payments. Unlike short sales, foreclosures are initiated by lending firms alone. Foreclosures are the end of the tunnel for lending firms. In this case, the financial institution repossesses the house, hoping to make good on the investment in the housing loan.

Unlike short sales, most foreclosures take place after the property owner abandons the house. If occupants are still inside the house, they are evicted legally by lenders. Once these firms have access to the house, it orders an immediate appraisal and put the property up for sale. T

In conclusion

Short-sale properties can provide good opportunities to buy homes for less money. In most cases, SS homes are in good condition, and while the price might be higher compared to foreclosed homes, the cost of making the structure marketable can be lower. The disadvantage to sellers is less severe. But because of the long process, sellers and buyers should be willing to wait. Experience real estate agents can help individuals determine fair offers, as well as negotiate with financial institutions.