subject: Short Sale: How a Short Sale Can Help You Avoid Foreclosure [print this page] Short Sale: How a Short Sale Can Help You Avoid Foreclosure
Today's market is filled with distressed homes for sale. It is said that one out of every four homeowners in today's market is facing foreclosure. Foreclosure on a property has consequences for the homeowners, the neighborhood, the surround housing market and the local economy. A short sale is an option which provides a means for troubled homeowners to avoid foreclosure and the repercussions involved.
A short sale is an agreement between a homeowner and their mortgage lender to take a payoff on a home loan for less than the current balance. In this market, lenders will agree to taking less than the mortgage balance because they will receive more money in this transaction than they would if the home was sold as a foreclosure.
The short sale process will also help maintain property values in the neighborhood where the home is located. Short Sales are typically sold slightly below market value while foreclosures can be sold at steep discounts. Foreclosures in your neighborhood can drastically change the market values, but working with your bank to settle for less than the sellers mortgage balance can help keep home values stable.
Homeowners who complete a successfully negotiated sale with their bank typically have a better level of credit compared to those who have gone through the foreclosure process. If sellers work on improving their credit score after they have closed on their home, they can possibly buyer another more affordable home within eighteen to thirty-six months. It can be seven years before person with a foreclosure on their credit score can buy a new home.
Sellers considering the short sale process must meet certain criteria or "hardships" to qualify. In most cases, homeowners must be behind on their mortgage payments. They need to show evidence of an economic hardship such a job loss, divorce, illness, or relocation. The most important criteria are that the homeowner must have little or no equity in the property. Real estate agents might refer to this as "being under water".
Short Sales can involve many parties in the approving the transaction. Most typical real estate transactions include the seller, the buyer, their agents, and the buyer's lender. In this process, in addition to those parties the following people could also have input on if your sale is successful: seller's mortgage lender, a housing counselor, any lien holders, mortgage investors of the seller's loan, and the loan insurers.
If considering if this is a good option for you and your family, it is important to contact a real estate professional who is short sale specialist to act on your behalf. The specialist will assist you in marketing your property and negotiating the offer with your bank. An experienced real estate agent will help you speed up the complex transaction and avoid foreclosure. All sellers should seek the advice of an attorney and tax expert before performing a short sale on their home loan.
