If you are facing an irreversible financial problem, then to “short sell” your home is one method for possibly finding relief from an important debt obligation. With a short sell, you have found a buyer who is willing to purchase your home at a cost that is less than your mortgage’s outstanding balance. Yes, your lender loses money on the deal and so do you; but a short sell is an option that your lender may accept provided that you have done your research.
Why A Short Sell?
Why would any lender accept a loss on the sale of your home? For a few reasons: if you can convince the mortgage holder that you are hopelessly behind on payments and that you have no possible way to make additional payments, then you are a strong candidate for a short sell. The foreclosure process is costly, something that your lender will have to handle. With a short sell, your lender can reduce their lawyer fees, avoid dealing with your pending bankruptcy and the usual delays that take place with foreclosing (including eviction costs), and not have to be responsible for managing and disposing your property which can add thousands of dollars to their costs.
Your Buyer’s Offer Might Be Considered
A mortgage lender may consider a short sell if the price the new owner is offering to pay for your home is close to its current value. If their offered price is significantly lower, then you will be tasked with convincing your lender that it in their best interests to go with what is a certain sale now versus having to later manage a hard to dispose of and costly piece of property later.
To gain the upper hand in this battle, you may need to document that your home requires extensive repairs, that the housing and/or job market is unfavorable, or you may need to outline some other plan to persuade your lender to accept a short sell.
Avoid Bankruptcy & Fix Your Credit
For consumers, a short sell is better than a foreclosure because the second option means that your credit standing has been wrecked. By choosing a short sell, you can mend a still-damaged credit rating faster and return to the housing market quicker once you demonstrate that your financial situation has improved.
March 5th, 2008 at 7:48 am
March 5th, 2008 at 6:43 pm
The way the real estate market has declined, this has become a last resort for many homeowners. In many cases it is the best option for the borrower as it will save them from having a foreclosure on their credit report, which very often is accompanied by a bankruptcy due to exhausting all of ones financial resources in a futile attempt to pay a mortgage on an adjustable rate mortgage that has adjusted out of the owners budget range.
March 6th, 2008 at 9:45 am
That’s correct, Anthony. It is an action of last resort, something homeowners should consider instead of walking away from their mortgages and trashing their credit.
There is one website — I won’t link to it — that is encouraging people to simply walk away from their financial obligations. To me, this is a mistake with lasting repercussions.
March 11th, 2008 at 3:05 am
[...] Your Home. Last week, I made mention of one option for getting out of your home — short selling. In summation, short selling allows you to find a buyer who offers to buy your home for less money [...]