Don’t want to go through foreclosure? Consider a short sale. A short sale describes a transaction in which you sell your property for less than what you owe on it. This option is available both to those behind on mortgage payments and to those with a home worth less than their remaining mortgage balance. So, if you’re unable to pay back your bank, they might agree to accept less than what you originally owed. Many lenders are hesitant, however, because they stand to lose money in a short sale. Before beginning a short sale process, the lender must sign off on the decision to pursue this route. Additionally, the lender will require documentation from you explaining why a short sale is the best option.
Pros and Cons of Short Sales
Short selling your home can result in less damage to your credit report than foreclosure can, has the potential to reduce or even outright eliminate your mortgage debt. Additionally, short sales allow homeowners to stay in their home until the sale is completed. Working through a short sale might also allow you to get a new mortgage through Fannie Mae and purchase a home faster.
Short sale deals often take a long time to close. Bank processing time, followed by a review period, can typically take 90 to 120 days or even longer. A foreclosure sale, on the other hand, might only take 30 to 45 days. Clearly, the short sale process is much more time consuming and taxing on your patience. Additionally, properties are often sold “as-is,” meaning that neither the bank nor the seller is likely to make any repairs to the property in a last-ditch effort to increase its value.
In short, this is a great opportunity for those who are struggling to keep up with their mortgage payments and looking to move. There are many challenges a seller faces in completing a successful short sale, but if done correctly, they can be beneficial for all parties involved. As always, do your research to decide whether a short sale is right for you.