A short sale is an alternative to foreclosure on a house, when a lender agrees to let the property be sold for less than what is owed on the mortgage. This is beneficial to lenders, such as mortgage companies and banks, because they can receive a portion of the debt back, as opposed to a foreclosure which can be time-consuming for banks and requires a commitment of maintaining the property through a resale.
It can also be beneficial for a seller. In the event that you’re not eligible for a loan modification and are struggling to make payments on your mortgage, you may want to negotiate the quick sale of your house.
Reasons to consider a short sale
- It is not a foreclosure: This means that, while a short sale will show up on your credit report and impact your credit score, the damage is likely to be less than what a foreclosure would bring. People who sell this way are often able to apply for a new mortgage and buy another home after two years, while some buyers can get a Fannie Mae loan to buy a home after only 60 days, if their credit report shows no late payments over the past several months.
- It can buy you some time: This process requires a lot of paperwork and a lot of waiting on the bank. With a short sale, you’re not waiting to be evicted, though. You’ve started a process that can take months. The bank has to agree to move forward with the sale and then approves a buyer offer. During this stage, you might have bought yourself some breathing room and some time to figure out what’s next – where you’ll move, researching storage solutions, and other elements of relocating. For many homeowners, this process can feel like taking back some control and feels more like a traditional sale than a foreclosure.
- It may prevent bankruptcy: A foreclosure can end up costing homeowners thousands of dollars. If someone is already struggling to make payments or facing financial hardship, this additional debt can be the tipping point towards the relief of bankruptcy. A short sale isn’t a homeowner’s dream, but it can help your financial future and potentially help you prevent further adversity down the road.
Benefits of a short sale over foreclosure
Short sales can have major benefits over a foreclosure, but they’re certainly not risk-free. That’s why we work with sellers as short sale experts. While working with a lawyer might seem like one more house-selling hassle when you’re already working with a realtor and a bank during a stressful, uncertain, and expensive ordeal, it’s in a seller’s best interest to partner with an attorney to help answer questions about the legal elements of the process.
Buying and selling a home is, after all, a financial transaction as much as a legal one. Banks and realtors help to facilitate the financial part of the transaction, while lawyers can help answer any questions about the legalities, which can be very helpful with something as complicated as the sale of your house.
Sometimes a short sale is really an investment in your future, and we can help make sure that you have peace of mind throughout the process by helping to protect your other assets and protecting you against personal liability. If you owe more than your house is worth and are worried about or being threatened with foreclosure, get in touch with us today for a consultation.