In this blog, we’ll cover everything you need to know about what a short sale is, as well as answers to some of our most frequently asked questions about short sales.
A short sale is an offer of a property at an asking price that is less than the amount due on the current owner’s mortgage. This most often happens when a homeowner is at risk of foreclosure and is looking for a way to get out from under a home before that foreclosure process hits. When a bank or lender agrees to a short sale, they either agree to forgive the remaining balance of the mortgage not covered by the short sale, or they require that the homeowner must pay the lender all or part of the difference.
In most cases, a short sale offers a path of opportunity for those at risk of foreclosure.
A foreclosure happens when the lender repossesses the property and tries to sell it for a price that will recover its initial investment. In this scenario, a homeowner is evicted and the bank repossesses the home. Foreclosure can be detrimental to finances and stays on a credit report for years after it happens.
A short sale happens usually in advance of foreclosure. Rather than having to deal with the process of foreclosure, a bank or lender may agree to a short sale, because they’re guaranteed at least a certain amount of repayment. A short sale can still affect a homeowner’s credit, though the impact is usually less than that of foreclosure.
As the homeowner, your credit may be damaged a bit as a result of a short sale, but it pales in comparison to the damage a foreclosure could do. In a short sale, you won’t make money off of the sale of the home, but if your lender is generous, you may have the debt reported as “paid in full.” As a bonus, you’re able to stay in your home during the entire short sale process.
The time it takes for a short sale can differ based on the situation. Sometimes it can take weeks, sometimes months. Depending on how experienced the real estate agent is, it can either be quick or it may take an extended period of time.
Besides foreclosure, a loan modification is an option to help make monthly payments more affordable for the homeowner.
While the short sale process will vary depending on the unique situation, most short sales follow these four steps:
If you’re considering a short sale as a result of financial hardship, a short sale may be an option. When done properly, it can help rescue your credit and can help you avoid foreclosure.
Short sales can be beneficial to many homeowners looking to sell their homes quickly. If you’re interested in moving forward with this process, contact our team at Renewed Homes. We’re happy to guide you through and make sure you’re making a financial decision that will positively affect your future.
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