What is a short sale?
A short sale is when a home is being sold for less than what is owed to the bank. For example: if a house has a mortgage of $300,000 on it, but its true market value is only $225,000. The bank may agree to accept $225,000 and forgive the $75,000 debt the owner would normally be responsible for.
What are the benefits of selling your home as a “short sale”?
- Short sale transactions usually release the borrowers from any obligation to pay back loan deficiencies lost by the bank.
- Short selling your home can allow you to be eligible to get a loan and buy another house much quicker than if you foreclose on one. Typically a borrower may buy another house after short selling in anywhere from 2-3 years. However, borrowers looking to purchase another home after foreclosing could wait anywhere from 5-7 years before financial institutions would issue them another mortgage.
- Short sale transactions cost the borrower NOTHING. All selling expenses involved with a short sale including attorney fees, real estate commissions and back taxes are paid by the lender.
- Foreclosures can really damage your credit and are much harder to bound from an opposed to short sale transaction.
- While in the process of a short sale, sellers are not required to make any mortgage payments. Short sales can typically take between 3-9 months, sometimes longer to be complete. During that time frame, sellers can get back on their feet and save some money.
- In the past owners involved in a short sale would walk away from the property owing nothing, but also making nothing. Currently, several institutions such as lenders, FHA and the US Treasury all offer cash incentives ranging from $2,000 to $30,000 to owners
Reasons the Bank and their insurers prefer you to short sell your home as opposed to taking it over in foreclosure.
- Banks are not good home owners’, it costs them more money to hire a staff of people to properly maintain their foreclosed investment. Despite having help, it’s never as good as when owners take care of their property. This can lead to further loss in the property value.
- In general, banks usually make out better and lose less money with a short sale than a foreclosure.
- Banks get their bad debt off their books quicker with a short sale.
Not all short sales are the same! An experienced real estate broker with the knowledge of the short sale process can be the difference in ending the transaction as a short sale as opposed to losing time and ultimately foreclosing on your home. If a short sale seems like it may be a good choice for you, please contact us to speak to one of our many short sale specialists who can assist you and get you on the right track.