Short sale is the process through which your mortgage company agrees to settle for less than what is owed to them. This can be a win/win for the lender and the homeowner. Lenders may be willing to do this as an alternative to the expensive and time consuming process of foreclosure, auction or bankruptcy. For the homeowner a short sale is typically less damaging to your credit than a foreclosure. We specialize in these types of transactions by re-negotiating the loan amounts of your property with your lender(s) allowing you to resell the house at a price suitable for current market value. At the end of the day you can possibly walk away with the accounts settled and move on with your life. Many homeowner’s whom are facing foreclosure tend to be “upside down” on their property; meaning they owe more than the property is worth, or cannot afford to sell their property and pay all costs associated with selling. This is when a short sale is most appropriate.
Why Short Sale?
The answer is simple, in order to avoid a FORECLOSURE. A foreclosure can be extremely damaging to an individuals credit report and have long-term effects on any individual seeking credit for up to several years. Since we live in a credit driven society, keeping a good credit rating can save a family thousands of dollars in attractive finance rates for vehicles, home mortgages, and other large items. A negative credit report and poor score can affect everything you do from renting an apartment to buying a car.
Short Sale vs. Bankruptcy?
Deficiency Judgments and How The Banks Handle The Loss
Short Sell VS Foreclosure
On the other hand, in a foreclosure situation, the bank takes ownership of the home after the buyer is unable to make the payment. This process is initiated by the lender. The lender will force the sale of the home to try to get back as close to the original loan amount as possible.
Most of the foreclosed homes have already been abandoned, but if the homeowners still live in them, the lender evicts them during the foreclosure process. The lender will then try to sell the property through an auction or through an estate agent.
The foreclosure process usually takes less time than a short sale as the lender is trying to liquidate the home as quickly as possible.
Which Is Better?
For homeowners, short selling is usually better than foreclosure for two reasons. First, short selling is voluntary (where foreclosure is compulsory). Second, after an acquisition, most people have to wait the standard seven years before getting another mortgage (while a short sale can make you wait at least two years). (1)
Most lenders would prefer a short sale to the takeover process as this allows them to get back as much of the original loan as possible without an expensive legal process. In fact, in most cases, the homeowner and lender will only seek foreclosure after trying to sell the home through a short sale process.