What is a Short Sale?
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A "short sale" can help you out of bad investments, help eliminate debt, reduce expenses or could possibly even complete satisfaction on your mortgage debt. Since the economy’s downturn, terms in the Real Estate market like “short sale” and “alternate financing” are cropping up more and more. But what do they really mean, and is this benefiting you? We’ll explore that in this article.
A "Short Sale" is an alternative to foreclosure if loan modifications are not possible, and may be an option if: you are ineligible to refinance or modify your mortgage, are facing a long-term hardship, are behind on your mortgage payments, owe more on your home than it’s worth in today's market, have not been able to sell your home at a price that covers what you still owe on your mortgage, or can no longer afford your home and are ready or need to leave.
A short sale is an alternative to foreclosure pending lender approval and can be a real benefit to all parties involved. Relocation costs can even be covered in some cases.
What is the process for a Short Sale?
If you qualify for this option, the process is similar to a normal real estate sales transaction. You will work with a real estate agent to market and sell your home. However, your mortgage company will also be working with you and your real estate agent every step of the way to:
• set the sale price (based on current market value),
• collect financial information and negotiate with other lien holders (i.e., your second mortgage company) if applicable,
• review acceptable offers,
• agree to the terms of the sale once a buyer is in place, and
• work with the buyer’s real estate agent and mortgage lender to finalize the sale.
A Short Sale may take up to 120 days, however this process could be shorter or longer depending upon your specific situation. While each bank will have different requirements for short sale approval, typically a bank will want to see that the Homeowner is behind on payments, the property is underwater, and the homeowner is experiencing financial hard times and does not have significant assets.
Again, these are not hard and fast rules. Some short sales do not require the homeowner to be behind on payments or to be in significant financial trouble, but these do help qualify a home for a short sale.
A lender who agrees to a short sale is doing so to lessen the financial blow that a foreclosure may cost them. A seller who chooses to sell with a short sale can get out from an underwater mortgage, thus reducing their debt load. A buyer may be able to get a significant price reduction when buying a short sale. Additionally, because of the hassle, there may be less competitionfor a property listed as a short sale as well.
Short sales can be a rather lengthy process, and can affect a seller’s credit negatively. It’s important to understand your best options and get all the information you need from an informed source. If you have any questions or would like more information on this process please contact me at (425)270-7292 or by email at firstname.lastname@example.org.
In my next blog we will explore alternatives to doing a short sale.