If you are thinking about selling your home, then you should know that there is a possibility it could be a short sale. What exactly is a short sale? A short sale occurs when the lender agrees to accept less than what's owed on the loan and release the lien on the property in return. Short sales have become more common over the last decade as people struggle with their mortgage payments or face bankruptcy. In this blog post, we're going to discuss some of the things you'll want to keep in mind before deciding whether to sell your home as a short sale.
Why do people sell their homes as a short sale?
There are several reasons that people sell their homes as short sales. Some homeowners might be able to make the payments on their home loans no longer and need to move to save money. In other cases, the homeowner is facing bankruptcy, resulting in an inability to pay for housing while going through the process.
Most of the time, short sales are caused by financial distress from the following situation:
- Borrower losing their jobs
- Health issues causing large medical debt/bills
- A significant drop in the market
- Pay cuts
What are the benefits of selling your home as a short sale
The benefits of selling your home as a short sale include:
- Saving your credit: If you default on your home loan and the bank forecloses, it will negatively affect your credit score. Selling as a short sale helps to maintain a good credit rating because the homeowner is cooperating with their lender
- Less of an impact on future borrowing power: In some cases, homeowners may be able to get approved for loans after selling their homes as short sales. Some lenders might even offer incentives or lower rates to help sell more properties
What are the consequences of selling your home as a short sale?
These sales can take months because there are many steps involved, and the process can be costly. Short sales take between four to six months on average.
It's not guaranteed: A homeowner may have to make up for lost equity by paying their lender back with interest over time. This could impact your credit and your ability to get another home soon. Speak with a lender if you have plans of buying another home, as you may no longer qualify.
Talk with your Realtor and lender to understand your options. Your Realtor will have a good understanding of the value you could get on your home based on comparable sales in the area. This can get you a sense of whether a short sale is even needed or whether you could sell them home and break even.
If you determine that a short sale is right for you, the next step is to speak with your lender who will help you start the process.
The decision to sell a home is never easy. But the process can be made much easier if you understand what's involved and have an experienced team on your side to help navigate it all. If you are considering selling your home as a short sale, contact us today for a consultation from one of our experts so that we may start preparing a game plan with you right away. Click here now to schedule your meeting!
