Why should I consider a short sale
Over 5.6 million homes were sold in the United States alone in 2020. Many more homes have been sold since then and some have even been subject to short sales. But what exactly is a short sale, and how is it different from an ordinary sale, bankruptcy or foreclosure?
How does a short sale affect you as an owner? Do short sales have advantages over other options? Read on and learn more about whether or not to consider a short sale when selling a home.
What you need to know about short sales
Short sales aren’t as common as they used to be, but some people may still decide to go through the short sale process. A short sale is a special situation in which the lender of a mortgage loan decides to accept a mortgage payment that is significantly lower than the amount owed by the borrower. This is done to allow a homeowner to sell their home if they need funds.
But what about the remaining loan balance? As for the rest, the mortgage lender will usually forgive it so the borrower doesn’t have to pay it. Short sales are not very common because they are not particularly beneficial to those involved.
Even the owner will not benefit as much from the sale of the house as usual. However, sometimes selling the house, as usual, is not possible. This is often the case for those who need money right away and can’t afford to wait for their house to sell.
For example, suppose an owner’s house has lost considerable value. This can happen for a variety of reasons, such as the decline of the neighborhood or the need for major repairs on the house. Either way, if the price of the house goes down, the homeowner may end up with a mortgage that is way above the value of the house.
This, of course, creates a very big problem for the owner. Selling the house, as usual, would not solve the mortgage problem since the house is not worth enough to cover the cost of the mortgage. This is why it may be worth taking the home through the short sale process.
As mentioned earlier, this is to help the home owner by giving up a certain amount of the mortgage. The big downside to a short sale is that it doesn’t make you extra money like a normal sale would. Instead, the majority of the money will go towards paying off your mortgage.
After the short sale, you may find it difficult to find another place to live unless you have already planned ahead. And yet, short sales are often preferred over the other option, which is foreclosure. But what is the difference between a short sale and a foreclosure and what makes a foreclosure much worse than a short sale?
Understanding a Short Sale
Most people would rather go through the short sale process than go through a foreclosure because foreclosures are terrible for your credit score. If you decide to foreclose on your home, you will find that your credit score will drop.
Once your credit score drops so much, it will be quite difficult for you to complete different tasks that involve your finances and credit history, such as opening new bank accounts, opening credit cards, getting loans and even getting a new apartment.
Also, in the case of a foreclosure, the landlord doesn’t have much control over the situation. Instead, the lender takes over the property and tries to sell as much of it as possible to recoup the cost of the mortgage. This can leave the ex-owner in a terrible financial situation from which it is difficult to recover.
Keep in mind that a short sale will also hurt your credit score to some degree. However, this will not damage it as much as a foreclosure. This is another reason why many people would rather go through the short sale process than a foreclosure.
What do you want to know
Even if your credit score drops from a short sale, it should still be good enough to get you an apartment or open a bank account. If you’re wondering whether or not you should go short selling, it all depends on your personal financial situation.
For example, if you know your home is going down in value and you won’t be able to pay off your mortgage, a short sale may be a good option for you, especially in the long run. In some cases, the decision may already be made for you.
Keep in mind that if you decide to refinance your home with a short sale, the process may take some time. There are some cases of short sales that take several months, while others may only take a few weeks. It’s usually best to hire a real estate agent to help you with your short sale so the process can progress faster and more efficiently.
All about short sales
Going through a short sale is a tough decision to make, but sometimes it’s necessary. A short sale isn’t as bad as a foreclosure because it won’t damage your credit score as badly. This involves the mortgage lender allowing the borrower to pay off a certain amount of the mortgage while forgiving the rest.
To learn more about real estate, please click here.