Short sale is a home-selling option for houses that have gone underwater, meaning that the mortgage you owe is greater than the current market value of your house.
In short sale, your lender allows you to sell your home for a fair price in the current market, and agrees to forgive the gap between the sale price and the total amount owed. This allows you to fully pay off your mortgage with the amount your house sells for. Typically, lenders grant homeowners the option to short sale when they meet the following criteria:
The current market value of the house is less than what is owed on the mortgage
The value of homes in Georgia and other places throughout the United States goes up and down, sometimes as drastically as a rollercoaster scaling and plummeting the tracks on its route. The market value of a home can decrease so dramatically that a house goes underwater, where the current value of the home is less than what is owed.
The homeowner needs to sell their house immediately
Ideally, homeowners who owe more than their house is currently worth could wait until the housing market shifts in their favor before selling. But many homeowners don’t have that option. Sudden life circumstances such as a divorce, job loss, the onset of serious illness, or an unexpected stack of medical bills can force a homeowner into a situation where they need to sell their house now.
The homeowner is facing a financial hardship
Selling a house to pursue a job offer in another city doesn’t exactly qualify you for a short sale. The changing life circumstances that force you to immediately sell your house need to relate to a financial hardship that will likely prevent you from regularly making your upcoming mortgage payments and put you at risk of foreclosure.
A short sale is a very specific financial arrangement between you and your lenders that can save you from a foreclosure on your home. Therefore, there are a few additional things you should know when considering a short sale.
1. Short Sales are Complex and Not For Every Distressed Borrower
Some homeowners consider a short sale because they are behind on their mortgage payments and are facing foreclosure. However, short sale is not a catch-all alternative for every homeowner who is facing foreclosure.
If you are already behind on your payments and your home is underwater, your lender may allow you to pursue a short sale, although you may not have time pull it off before they decide to foreclose. Ultimately, short sale is a complex process. It is up to your lender to decide whether or not they are willing to offer you the option to short sell.
2. You Don’t Have to be Behind on Your Mortgage Payments to Make a Short Sale
Many homeowners request a short sale option from their lenders before they fall behind on their mortgage payments. For example, a homeowner may be completely up-to-date with their home payments, but because their spouse has filed for a divorce, they need to sell their home immediately, despite the house being worth less than what is owed. In fact, you may be in a better position negotiate a short sale option if you are up-to-date on payments and on good terms with your lender.
3. You Typically Receive No Income From a Short Sale
In a short sale, your lender will have to take a loss, no matter what. They will want to get the most out of the home sale, which means that in almost all cases, your lender will take the full amount the house is sold for. Unfortunately, as the homeowner, you will lose out on any equity that you have invested into the property.
4. Short Sale Does Less Damage to Your Credit than Foreclosure
A short sale can prevent a foreclosure, which turns out to be greatly beneficial when it comes to your credit score. A foreclosure stays on your record for five years and prevents you from buying a home for the seven years that follow. On the other hand, many homeowners who opt for a short sale can immediately qualify for another mortgage.
5. A Short Sale Benefits Your Lender, Too
It is a matter of fact that a foreclosure is a stressful and expensive process, not just for the homeowner, but for the lender as well. The lender must wait out a grace period before they can give you a notice of default. From there, they must wait an additional number of days before they can order an eviction. Your lender might not want to go through the time or trouble, which
Gives you some leverage when requesting a short sale. If you can let your lender know that your financial circumstances are going south, and that they may be able to avoid the trouble of foreclosure, they may be just as happy as you to consider a short sale.
If You Need to Sell Fast in a Short Sale, Find Out If Arbor View is Right For You
It’s an unpleasant surprise to find out that your house is worth less than what you owe, especially when you need to sell ASAP. In some cases, your lender will also want to sell the house as soon as possible to cash in on what they can and avoid the arduous ordeal of negotiating with multiple buyers or, even worse, a foreclosure.
At Arbor View Properties, we buy houses fast. We can save you and your lenders the time and money involved with selling a house that you can longer afford that is worth less than what you owe. To learn more about how Arbor View can help, visit our service page, Selling a House to Avoid Foreclosure, or contact us today at 770-810-5715.