Short Sale: A Favorable Alternative to Home Foreclosure
Putting your home on the market as a short sale is not favorable but can be far better alternative than allowing it to fall into foreclosure. A short sale is when the lender agrees to allow the homeowner put their home on the market for less than it is worth and without having to pay the difference. A short sale is only beneficial if the lender does not report the deficiency on your credit report. However, it will still show as a negative account on your credit report since the ‘settled’ amount is less than what was owned.
If you are considering a short sale in lieu of foreclosure make sure that you meet the standards of a ‘qualified’ applicant. Common factors are deficiencies in mortgage payments. Lenders will consider your application if you are at least two months behind on your mortgage payments. Another factor is the hardship of selling the home. The home must be unable to sell for the amount that it is worth or the amount that is owed, in addition to closing costs. One more factor is the value of the home itself. The home must not have any equity.
If you do find yourself as a qualified applicant then there are a few steps you need to complete during this short sale process. First, you need to make sure that a short sale is a last alternative to avoiding foreclosure. You will need to be unable to sell the home any other way, unable to do a loan modification, take out a second mortgage, or do a loan assumption. It is highly recommended that you try these options first since they will not be as harmful to your credit report as will a short sale.
Next, you will have to prove to the lender that you have absolutely no means to pay your current mortgage. Be prepared to provide bank statements, tax returns, and other financial documents to prove financial crisis claim. The lender is going to be very thorough when checking these documents; lenders are aimed to find a financial source that you can use to continue paying towards the mortgage. It is at this step when the waiting game begins. This process may be called a ‘short’ sale, but the process can be long. The average time for a complete short sale is six to nine months.
Finally, when you are approved for the short sale, make sure you are assisted by a good real estate agent. A good real estate agent will be experienced in marketing, consulting, and closing short sale homes. There is a lot of paperwork that flows between the seller, buyer, and lender and you will need someone that can navigate them with ease. A good short sale real estate agent will be able to price the home at its current value to ensure minimal loss to the lender.
Giving up your home can be a traumatic experience and going into foreclosure makes it even more devastating. A short sale won’t cure the home selling woes, but it may leave your credit report in a more favorable position for purchase of another home than would a foreclosure.
More by this Author
Here's some tips on requesting penalty waivers from the Florida Department of Revenue.
Due to the poor status of the economy, many businesses have to close. If you have found yourself in this situation, it may be unclear as to how your tax accounts should be cancelled with the Florida Department of...
$500 a night for a hotel themed after plastic bricks.
No comments yet.