With all the news about the rising number of foreclosures, most American’s, even those who are not property owners have heard the term -short sale.’ The idea sounds a bit odd. After all, why would a lender agree to allow their borrowers to sell the property for less than the total amount due on the mortgage? The truth is a short sale can be financially advantageous for all of the properties involved.
In short, a short sale is a financial transaction in which a property owner sells their property for less money than they owe on it. The property owner typically opts to do this when they are facing foreclosure or bankruptcy. The lender must first agree to the arrangement. This isn’t typically a problem if the lender has reason to believe that the mortgage holder will not be able to continue making their payments. While that sounds counter intuitive, it actually makes sense when you consider that a foreclosure will cost a lender up to $50,000.00 to process.
A short sale is a good option for a home owner who only has one loan and who cannot make their payments. When successful, it allows them to satisfy their debt. Some lenders will process a black mark on the borrower’s credit report, but they cannot place a foreclosure on the report.
Buyers are lucky as well – they can purchase a home or property for much less than its value. There is one drawback for buyers: a short sale can take considerably longer than a traditional property purchase. Still, if a buyer has time, it can be a great way to pick up a piece of property.
If you are facing financial difficulty, be sure to contact your lender to discuss the possibility of a short sale. It may be the best way to protect your credit.