If the value of your property has depreciated, or if your mortgage payment is too high leaving you stuck in a home you cannot afford, you may want to consider a short sale?
A short sale is a settlement agreement between you and the bank that allows you to sell your property for less than what you owe. The money from the short sale pays off your mortgage, completely. You may be asking…why would the bank let you do that?
Simply put, the lender very likely sees a short sale as the best way out of a bad situation. The bank’s other option is to foreclose on the property. However, in most foreclosures, the bank spends considerable time and expense with the court in obtaining it, only to take a loss once the property is sold for a steep discount at a sheriff’s sale.
Short sales also provide a future benefit – they are much better for your ability to finance new loans than the alternatives. A short sale shows up on your credit report as a “settlement” and carries less severe consequences than a foreclosure.
Typically, a foreclosure knocks your credit score down by as much as 250-300 points, and it stays on your credit report for 7 years, negatively impacting your ability to get future financing for things like credit cards, cars, loans, mortgages, and even rental housing and employment.
If, on the other hand, you completed a short sale, your credit report would likely fall only 50-75 points, which is something that you can rehabilitate in very short order. You can apply for an FHA loan and be back in a house you can afford in as few as 2 years.
Timing is extremely important with a short sale. You want to avoid the bank’s move to foreclose on the property if at all possible, and a successful short sale requires documents from you, your realtor and my office. If the foreclosure process is already underway, a short sale may still be in your best interests.
TadrossLaw works with homeowners to help them navigate their way through the options available to them and will help them make the right choices for their situation. Contact us now to find out if you qualify for a short sale and to discuss your options!