What is a Short Sale?
“Short Sale.” We have all heard that dreaded phrase before but not all of us understand it. This article breaks the term down so that you know exactly what it means and what your options are.
Simply put, when someone is in a “short sale” situation, they owe more on the house than the house is worth. You might be wondering how someone gets into this situation in the first place.
Short sales have been popping up all over the country, not just in Louisville, KY. When the housing economy tanked in 2008, home prices everywhere dropped. Someone with a large mortgage and a house that then dropped in value from $200,000 to $170,000 could have easily ended up in a situation where they actually owed MORE on the house than what the house is worth.
In a short sale situation, a seller is facing a threat of foreclosure. Instead of foreclosing, the seller can work with the mortgage lender (usually a bank) to come up with an agreement. With a short sale, the lender will agree to write off part of the mortgage as a loss instead of having the borrower default on the loan. This is beneficial to both parties; borrowers can avoid having a foreclosure appear on their credit report, while lenders can avoid substantial fees associated with foreclosure.
Therefore, a short sale is an alternative to foreclosure and may be an option if:
- You are behind on mortgage payments
- You owe more on your home than it is worth
- You are ineligible to refinance your mortgage
- You are facing a long-term hardship (divorce, medical bills, etc.)
- You can no longer afford your home
What are the benefits of a short sale?
The benefits of entering into a short sale are huge for the seller. For one, you can greatly reduce or even eliminate your mortgage debt. Even more importantly, however, is avoiding the negative impact of foreclosure. Foreclosure will show up on your credit report and impact your credit score in a major way. Entering into a short sale can stop this credit damage from taking place. Furthermore, you may be eligible to purchase another home sooner (in as little as two years) than if you went through foreclosure, which can keep you from homeownership for another seven years.
How do I get started?
If you think a short sale may be the answer for you, your first step should be to contact us. We can help you market and sell your home and work with you and your mortgage company to properly:
- Set the sale price
- Collect financial information and negotiate with other lien holders
- Review and analyze offers
- Agree to the terms of the sale and write a contract once a buyer is in place
- Work with your mortgage lender to finalize the sale
Short sales are not as scary as they seem. They simply offer an honest way for a home seller to avoid the frustration, sadness, and headache of foreclosure.