Selling A Home Through A Short Sale
In today's real estate market, foreclosures and short sales are not abnormal. Foreclosure rate as a whole is significantly down in comparison to 2008-2012, but they are still showing up in neighborhoods across the country. This is partially due to a change in the employment sector, approval rates, and the always present, infamous inflation. We find short sales in markets where previously highly inflated housing prices are now back down to normal steadily increasing amounts after the crash. This means families still owe more than the current market dictates their house as being worth. This is considered being "in the red".
A simple explanation of the short sale process is selling of a house for any amount less than what the mortgage holder is owed. In the short sale process, the bank takes a loss on the difference between the sales price and the amount they are owed. This is normally negotiated with the home owner and the bank before the home owner decides to "walk" on the home mortgage.
The short sale process is accepted by many lenders because their options are essentially to accept the short sale or allow the homeowners to remain in their home despite the fact that they cannot pay the mortgage. Banks realize the person is not above discontinuing making mortgage payments, usually because he or she is currently delinquent, and the lender prefers not to look toward the foreclosure process.
Is this your last option?
While banks and other lenders are willing to accept a short sale in many situations, it is important to realize they view this as a final stand or "last ditch effort", meaning they do not take the final decision lightly, and the process can take some time to get approved. In addition, a short sale means that the home owner is giving up much of their ability to negotiate with sellers, and they are handing the reigns over to the lender for the final approval of any home sale. This can cause the sales process to take longer, and result in much frustration for the home owners.
Entering into a short sale is not as harmful to someone's credit score as a foreclosure would be, but it is not the best option either. Most lenders will hesitate to give money to an individual who has recently gone through a short sale, and this can make it difficult to immediately rent a home or purchase another home. Sellers are advised to consider their future living arrangements before making the final decision about a short sale.
It is highly advised, for both the seller of a short sale home and the buyer, to seek out the assistance of a professional Realtor who has worked through many short sales to assist during this sometimes confusing process. This person should have experience working with local lenders and overcoming many of the obstacles that can show up along the way. Having someone with the know how who can negotiate for you can be a huge advantage to not only make sure the process goes smoothly but also increase the likelihood the bank accepts the offer in the first place.
The short sale process can be beneficial to families in financial distress, but the final decision to sell a home in this way should not be made without careful consideration and consult with several real estate professionals, CPA, and financial advisor. There will be negative credit implications. However, these aren't near as bad as losing the home to foreclosure. Consider the damage that will be done to your credit before making a final decision, and always consult with a financial expert to discuss any other options you might have.
Get the help you need if this is now your reality or have a friend going through the process. I will be more than happy to answer any questions or concerns you may have. Email me directly at firstname.lastname@example.org . I look forward to meeting you. Have a great day!