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Risks of Buying a Short Sale Home in Lagos, Nigeria this 2022

Posted by support on May 5, 2022
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Short sale home in Lagos–perhaps someone has advised you to avoid this, or you’ve heard they’re a terrific deal! Whatever you’ve heard, the simple line is that purchasing a short sale property is a difficult procedure. Only a small percentage of short sales are completed in 30 days. Whether or not it’s worth the extra effort is a matter of personal preference. Before buying a house for a “too good to be true” price, learn about the short sale procedure and speak with your real estate agent.

What Is a Short Sale?

A short sale is a real estate transaction in which the lender agrees to accept less than the balance outstanding on the mortgage.

These two conditions must be met for sale to be termed a short sale:

  1. The homeowner must be so far behind on payments that they cannot make up the difference.
  2. The housing market must have plummeted to the point where the house is now worth less than the remaining mortgage debt.

The lender (and the homeowner) will most likely pursue a short sale to prevent foreclosure.

In general, there are a lot of misconceptions about short sales. However, a prevalent misperception is that lenders want to get rid of the property as soon as possible to recover as much money as possible. The lender will take as long as necessary to recoup as much of their loss as possible. Just because a house is advertised as a short sale doesn’t mean the lender has to accept your offer, even if the seller does. The reason why the short sale procedure is so difficult.

Foreclosure vs. Short Sale

For sellers who wish to get rid of their mortgage, neither a short sale nor a foreclosure is a straightforward option.

  • Foreclosure

In a foreclosure, on the other hand, the bank takes possession of the home once the buyer is unable to make payments. The lender initiates this procedure. The lender will forcibly sell the residence to recoup as much money as possible from the initial debt.

Although most foreclosed properties have been abandoned, the lender will remove the homeowners if they remain in the home during the foreclosure process. After then, the lender will try to sell the property at auction or through a real estate agent.

Because the lender attempts to dispose of the home as quickly as possible, the foreclosure procedure often takes less time than a short sale.

  • Short Sale

In a short sale, the homeowner is the one who starts the process of selling their home. The home must be valued less than the amount owed, and the homeowners must be so far behind on the mortgage payments that they don’t believe they will be able to catch up to qualify for a short sale.

Potential purchasers will deal with the home sellers during the short sale procedure, but the lender must examine and approve all of the process’s specifics. The lender must authorize the short sale before it may take place.

Even if the homeowner and the potential buyer agree on conditions, the short sale procedure can be lengthy and unpredictable because everything is dependent on the lender.

Short Sale Home in Lagos or Foreclosure: Which Is The Better Option?

A short sale home is often preferable to foreclosure for homeowners for two reasons. A short sale is an entirely voluntary transaction (while a foreclosure is forced). Second, most consumers are forced to wait seven years following a foreclosure before applying for a new mortgage loan (while a short sale may cause you to wait for at least two years). (1)

Most lenders prefer short sales over foreclosures because they allow them to reclaim as much of the original loan as possible without going through a lengthy judicial procedure. Most homeowners and lenders will seek a foreclosure only after attempting to sell the home through a short sale.

How Does Short Sale Home in Lagos Work?

Look no further if you’re curious about the normal stages that typically occur during the short sale home process.

Step 1: The homeowner should first speak with their lender and a real estate agent about the possibility of a short sale. They can now present their lender with a short sale deal. They’ll also have to show their lender that they’re no longer able to make their mortgage payments and don’t have any assets that could help them catch up.

Step 2: The homeowner lists the property with the help of a real estate agent. They’ll sign a sales contract for the property after a buyer has expressed interest. Even if both the seller and the buyer agree on the conditions, this contract is subject to the lender’s approval and is not final until then.

Step 3: The lender examines the contract and may respond in several ways. They might choose to either not react, reject the offer, or specify which parameters they would accept or approve.

Step 4: When the lender’s response is delivered to the prospective buyer, the contract will remain unchanged, or the buyer will select whether to accept or reject the lender’s conditions. As a result, the ball is now in the buyer’s court!

Step 5: The short sale property closes, and the home is transferred to the new buyer if the contract is authorized. The lender receives all proceeds from the property sale and relieves the original homeowner from their mortgage obligation.

How to Purchase a Short Sale Home in Lagos

If you’re thinking about buying a short-sale property, here are some pointers to consider.

1. Do your homework. Work with your real estate agent to conduct due diligence on a short-sale property before making an offer. Your realtor can go through public records to determine how much the homeowner owes on the mortgage. Your realtor should be able to provide you with good advice on making an offer based on it and comparable houses in the area.

2. Recognize that the lender is in charge. While you may be working with the seller and their agent to submit an offer, remember that the lender is ultimately in charge of the short sale process.

3. Conduct a thorough home inspection at all times. You may be tempted to skip the inspection to expedite the process when buying a short sale, but this is a big error. Always engage a professional home inspector to inspect the property. Purchasing a home without doing a thorough inspection might be disastrous.

4. Collaborate with a seasoned real estate agent.

It would help if you had an expert real estate agent who has specific experience with short sale properties, whether you’re selling or purchasing in the short sale process.

Because short sales are so complicated, you’ll need a trustworthy real estate professional to guide you through the process and answer any questions you may have.

Short Sale Home: Why Do Lenders Do Them?

The only reason a lender would want to go through a short sale—and, as a result, accept a mortgage payback amount that is less than the sum owed—is because they believe it is their best chance to reclaim as much of the loan balance as possible.

As a result, a lender will refuse to accept a short sale if:

The loan is up to date. If the homeowner is making timely payments, the lender has no reason to believe they won’t be able to do so in the future. (That’s self-evident!) In most cases, a notice of default must be delivered to the homeowner before the lender can consider a short sale request.

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The property owner files for bankruptcy. In bankruptcy, negotiating a short sale is considered a collection action, which is not permitted.

The lender’s only gain is that a short sale is quicker and less expensive.

Why Do Homeowners Sell Their Houses in Short Sales?

Selling a home when you have negative equity is a bad idea. Even if you break even on your house sale, it’s still not ideal. Unless you’re seeking to escape bankruptcy or foreclosure, you shouldn’t sell your home if you’re in either condition.

The homeowner’s main goal throughout the process is to persuade the lender that a short sale is the best alternative. The homeowner must do the following:

  • Demonstrate that they won’t be able to catch up on payments and don’t have any assets—cash, savings, cars, etc.—to do so.
  • Confirm that the local property market value has dropped because the home will not sell for enough to pay down the current mortgage balance.
  • Most lenders will require a signed contract with a buyer to consider a short sale.
  • Ensure that the short sale agreement contains a waiver of the lender’s right to pursue the homeowner for the outstanding loan balance.
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Both the lender and the homeowner must be willing to sell the house at a loss for a short sale to occur. The homeowner will make no money, and the lender will lose money because the house will be sold for less than what is due.

A short sale is not something you can do on your own. It’s critical to hire a real estate agent with short-sale knowledge.

3 Things to Think About Before Purchasing a Short Sale Home in Lagos

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Whether or not you should buy a short-sale home isn’t a black-and-white decision. The property’s characteristics and your specific situation will determine whether or not a short sale is good for you.

One thing is certain: if you want to acquire a short-sale home in Lagos, you should expect a lengthy and complicated process in most situations.

Before making an offer on a short sale home, there are three things you should know:

1. Expect a long and unpredictable timeline.

Because the lender must approve the short sale contract, you may not know if your offer has been approved for weeks or months. There’s no way of knowing how long the process will take because it’s entirely dependent on the lender’s willingness to sell the house.

2. You’ll almost certainly have to purchase the house as-is.

Because the lender is in charge, it isn’t very likely that they’ll agree to pay for any additional charges, such as closing costs or desired repairs. You may not be able to request repairs, but you should always get a home inspection done, so you know precisely what you’re getting into when you buy a house.

3. You might not be getting the best value possible.

When a short sale property is put on the market, it may be listed for less than it is worth to attract purchasers. However, this does not guarantee that this is the price it will sell. Because they’ll want to achieve a price as close to market value as feasible, the lender usually doesn’t analyze the price until there’s a proposed contract and an appraisal in the short sale process.

A seller may be willing to accept a lower offer than the list price if the closing situation is favorable or if they have a tight deadline. In a short sale, the lender’s purpose is to lose as little money as possible. While there are times when a short sale home is a good deal, this isn’t always the case—so be cautious.

Searching for Short Sale Home Listings in Lagos

Start your search for a short sale by checking through the PlistHub Listings.

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If you have access to search terms, the first step in identifying short sales is to find where the term “short sale” appears. It might be listed under “status modifier,” or it could be in the marketing comments– use that field as a search keyword.

Short sales aren’t always labeled as such by agents. Instead, they could use words that indicate the listing is for a short sale, such as:

  • Subject to bank approval
  • Notice of default
  • Give the bank time to respond
  • Preapproved by a bank
  • Headed for auction
  • Third-party review required

While the term “short sale” may not appear in the MLS, there are other terms that can give you a hint.

It would be best if you spoke with a real estate agent familiar with the short sale process before considering purchasing a short sale home. You can confidently manage the short sale procedure with the appropriate real estate agent! Furthermore, if you have legal questions at any point during the procedure, a lawyer can help.

Find an agent today!

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