In a short sale the home owner owes more money on the mortgage, and other property liens, than the sale of the home will likely produce. And the home owner is unable or unwilling to bring cash to the closing. The lender has not yet foreclosed on the property, providing the home owner an opportunity to sell the home and perhaps partially reimburse the lender.
An advantage of a short sale is that it will lessen the impact on the surrounding neighborhood. Foreclosures have a greater downward price pressure on the surrounding area, than a short sale would. More importantly, for the seller, a short sale will not hurt the credit score as much as a foreclosure would. Foreclosure remains on credit history for seven years and can take 200 points or more from ones credit score.
While a short sale may be the best approach for a home owner, not every home owner can be a short sale candidate. For the home owner to be a good candidate, the home owner must have a valid hardship. A valid hardship would be events such as job loss, business failure, medical costs, divorce or death of a spouse, or some natural disaster. Take note here that a loss in equity is not considered a hardship. Just because the market went sour and you have lost equity in your home, that is not considered a hardship.
Also is there enough time to accomplish a short sale? If you have two months or so left before a judicial sale, then it is really too late to take the short sale route. After all a short sale requires quite a bit of marketing to get people aware of the availability of a home.
In our current environment, the difficult part is determining the price the home will be offered. With high inventories, a declining market, and buyers sitting on the fence, the value must be set so that it is not too high. Too high and no one who can afford it will see it, too low and the home owner will lose more money. In fact too low and the lender may not accept it. See and this is another problem with short sales, instead of dealing with two parties, we are really dealing with three parties.
How much does the home owner owe on the property? Are their other liens like a second mortgage, property taxes, or other liens? Has the home owner talked with their lender, tax professional, and attorney? If the home owner is acting in good faith and generally cooperative, then a short sale may work. By being in a state of denial, or being uncooperative, sometimes the only alternative may be foreclosure.
I must say that if you think you are heading for trouble with your mortgage you must contact your lender as soon as possible. By being proactive you will have more options and hopefully a better outcome.
An advantage of a short sale is that it will lessen the impact on the surrounding neighborhood. Foreclosures have a greater downward price pressure on the surrounding area, than a short sale would. More importantly, for the seller, a short sale will not hurt the credit score as much as a foreclosure would. Foreclosure remains on credit history for seven years and can take 200 points or more from ones credit score.
While a short sale may be the best approach for a home owner, not every home owner can be a short sale candidate. For the home owner to be a good candidate, the home owner must have a valid hardship. A valid hardship would be events such as job loss, business failure, medical costs, divorce or death of a spouse, or some natural disaster. Take note here that a loss in equity is not considered a hardship. Just because the market went sour and you have lost equity in your home, that is not considered a hardship.
Also is there enough time to accomplish a short sale? If you have two months or so left before a judicial sale, then it is really too late to take the short sale route. After all a short sale requires quite a bit of marketing to get people aware of the availability of a home.
In our current environment, the difficult part is determining the price the home will be offered. With high inventories, a declining market, and buyers sitting on the fence, the value must be set so that it is not too high. Too high and no one who can afford it will see it, too low and the home owner will lose more money. In fact too low and the lender may not accept it. See and this is another problem with short sales, instead of dealing with two parties, we are really dealing with three parties.
How much does the home owner owe on the property? Are their other liens like a second mortgage, property taxes, or other liens? Has the home owner talked with their lender, tax professional, and attorney? If the home owner is acting in good faith and generally cooperative, then a short sale may work. By being in a state of denial, or being uncooperative, sometimes the only alternative may be foreclosure.
I must say that if you think you are heading for trouble with your mortgage you must contact your lender as soon as possible. By being proactive you will have more options and hopefully a better outcome.
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