Flat Fee MLS Blog

 Short Sale: An alternative to foreclosure for down-on-their luck homeowners. It’s a sale for less than the owner owes on their home, and is never easy. 

A short sale is not a simple process and it requires the lender’s approval at every stage. If an offer is made, the bank needs to decide if it is within the range they will accept. If they do accept it, the owners need to find out for sure if their remaining debt will be absolved. Some lenders will do this but others may force the seller to pay their remaining debt by selling off their other assets.

Foreclosures mark one’s credit rating for seven years and the impacts of foreclosure are far reaching and negative. The chance of being absolved of debt is very appealing to down-on-their-luck home-owners, considering the alternative is to foreclose. However, even though a short sale shows up differently on your credit report it can still have a negative impact. 

Most banks prefer to accept a short sale than to foreclose, as they must pay taxes on every property in their possession. Taking a small cut in the sale of the home may still save them the money and hassle involved in foreclosing. So short sales are a better option, but they can end up taking months longer than conventional home sales.

A short sale is a serious thing, and won’t be accepted by the lender without proof that the market drop has created a situation wherein the homeowner will absolutely not be able to sell the home for what they owe. Also, a short sale usually can’t happen until the homeowner is in default, or is about to go into default. The homeowner will probably be expected to show, in writing, why they are unable to make further payments or pay the remainder of their debt. Suitable reasons include a death or critical illness in the family, divorce, loss of a job or bankruptcy. Homeowners will also need to show the lender that they have little or no assets. Ultimately, it’s in the lenders hands whether or not a short sale is accepted.

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This entry was posted on Thursday, July 31st, 2008 at 3:47 pm and is filed under short sales, tips, foreclosures, home for sale. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.