Factoring in with a Short Sale in Las Vegas
The real estate market in Las Vegas is definitely one of the most active markets in this part of the United States. Recently, new home sales posted a record high across the valley, beating a previous record posted in 2008. Demand has mellowed out in recent months, but sales for Lake Las Vegas, Henderson, and South Valley Ranch luxury homes are still in high figures.
While most prospective buyers are looking at newly-furnished and resale exclusive properties to buy in The Valley, there is still a substantial segment of the purchasing population that are looking into short sale homes as their first or second choice. Shorts sales offer prospective buyers with a less expensive alternative with luxury home purchases thanks to cutoffs from the original mortgage dues that the seller has. For the wary Las Vegas luxury real estate owner, a short sale can be a good way to ease out of an overdue house payment. However, it is a risky endeavor; engaging in a short sale without knowing the basics can cause financial problems in the long run.
Short Sales in Review
Short sales usually happen because of a number of factors, including:
- Legal obligations where the lender and the borrower have to compromise because the borrower has virtually no means to pay off the outstanding mortgage dues
- Potential decline in clients if the lender fails to resolve the mortgage issue immediately
- Cost-cutting, as mortgage lenders must provide maintenance for a foreclosed and unsold property
- Non-performing loans can take a substantial amount of the lender’s reserve funds, which could’ve been provided to other borrowers
Home owners with a mortgage deficit tend to go for a short sale instead of defaulting to a foreclosure because it eases them of their mortgaging burdens in the shortest possible time. While the decision to make the sale ultimately lies in the lender, most of the benefits will still go to the homeowner. Short sales cannot, however, be used in an advantageous way thanks to revised rules. This means that the seller can only request for a short sale if they have a valid reason for missing their payments.
Qualified or Not Qualified?
Short sales are often made in slow periods when the seller needs to dispose of both their debt and their old property as soon as possible. They also take place in a robust real estate market where the demand and asking prices are both high. Short-sale luxury homes are a good second option to invest in because of the lower asking price.
However, owners must remember that there are several qualifications before they can prep their property for a short sale. Banks will not approve a short sale request if a number of these qualifications are not met. A number of these qualifications include are listed here.
- The seller is facing serious financial problems. It could be anything like a sudden death in the family, a sudden and significant loss of income, death or separation with a spouse, and unforeseen increase in living expenses. These are usually indicated in the hardship letter that accompanies an application for short sale.
- The mortgage is approaching, or is already in default. As mentioned earlier, defaulted mortgages can hurt a lender as much as the homeowner, so the closer the property is to defaulting the higher the chance for the property to be approved.
- The home’s value has declined. This involves comparing the original selling price to other sold homes within the property’s vicinity over a certain period.
- The seller no longer has any other assets to liquidate. This is substantiated by a tax report indicating the lack of assets that can pay for the mortgage difference.
To Sell or Not to Sell
Ultimately, a short sale is a tool of last resort, aimed at reducing the financial burden on a homeowner while preventing him or her from getting a more serious hit on his or her credit rating. In some cases short sellers can easily buy a new property even with their lower credit score. They no longer have to worry about extra financial burdens once the property has been dealt with in full.
However, short sales can go either way. The seller can close the deal, but all the payments will still go to the lender as part of their financial agreement. The banks can refuse the deal at the last minute if they find the offers to be unreasonable. Additional expenses can suddenly pop up that may complicate the deal. The seller must weigh the benefits against the risks of short-selling the home before committing to it, because once the short-selling process begins it will be difficult to back things up.
Short sales offer a lot of risks and benefits in the same deal, but a seller can only get the most out of the sale if it is done right. Consult with a luxury real estate professional before proceeding with a short sale to avoid any unnecessary consequences.