Why are short sales predicted to spike? Let’s take a look at what this means for you!
The Number of Short Sales in Florida Expected to Rise
As we stare down mid-April, Florida and the rest of the country is still fighting against the COVID-19 pandemic. Short sales were already predicted to spike this year, but now we may see an even higher spike due to the economic situation brought about by the coronavirus. This week, I want to fill you in on what you need to know about short sales.
What is a Short Sale?
A short sale occurs when the seller receives less for the home than what is owed on the current mortgage. Basically, the seller does not receive enough money from the buyers to pay off the current mortgage on the home. The buyer does not pick up the difference and the seller is ultimately forgiven of the remainder of the balance upon selling the property.
Reasons for Short Sales
There are a few different reasons that a short sale may occur. These include:
- The seller paid too much for the home, to begin with, meaning he or she paid more than fair market value.
- The seller borrowed too much money for the mortgage. For instance, some buyers make the mortgage more than the purchase price of the home and then use the remainder to furnish the home or make upgrades.
- The market has dropped, so the property’s fair market value is less than the current mortgage on the home.
Why is a Spike Predicted?
For starters, many lines of credit with 5 or 10-year maturity dates are now reaching maturity. This means that the homeowner’s payment rises significantly. Unfortunately, many homeowners are no longer able to afford the mortgage payments.
This issue is further exacerbated by the uncertainty that Floridians and the rest of the country are facing in the form of job and financial security. Only time will tell us how much short sales spike in Florida.
This is Gitta, with Gitta Sells and Associates. My team and I are more than happy to help you navigate the home buying and home selling process to get the most bang for your buck. Contact us today at email@example.com or 407-330-2181.