The Advantages of Short Sales Over Bankruptcy or Foreclosure
When buying a home, no homeowner is thinking about the possibility of a foreclosure. However, when the value of a property falls below what a homeowner owes on the mortgage, and the homeowner is no longer able to make the payments, the idea of foreclosure quickly begins looming. Fortunately, homeowners faced with the repossession of their homes are not without alternative options. In many cases, the best solution is a short sale.
A short sale is a transaction in which delinquent homeowners get permission from their lender to sell their properties for less than the amount owed in the hope that, after the quick sale, the lender can recoup the majority of their losses.
The Philadelphia bankruptcy lawyers at Tadross Law also know short sale. They can provide legal counsel and short sale negotiations in the region, and they will help their clients reap the benefits of short sales, including:
Avoids Foreclosure & Provides Credit Protection
One of the worst financial events in a person’s life, next to bankruptcy, is foreclosure. Not only is foreclosure an extremely litigious and frequently drawn-out process, but it will also put a black mark on the borrower’s credit score, often dropping the score upwards of 250 points. The mark cannot be lifted until seven years after the first missed mortgage payment, making it nearly impossible for the borrower to take another loan for a long time.
A short sale can bypass the foreclosure process entirely. While a short sale, along with previously-missed payments and other unpaid debts, will still negatively affect the borrower’s credit score, the effects will be much less substantial than those from a foreclosure. The borrower may still need to build credit, but getting another loan is much easier after a short sale than otherwise.
Helps the Borrower & Lender Save Time and Energy
Foreclosure is a bear that most lenders do not want to tackle. With hearings, legal filings, and the prospect of selling the home and hiring a real estate agent during the foreclosure process, most banks and other lenders would prefer the short sale, where they would recover at least a portion of the owed money. Additionally, most foreclosures end up costing borrowers over $7,000 in legal fees.
Gives Homeowners More Control & Peace of Mind
Foreclosures are long and arduous and can cause a great deal of confusion, especially when demand letters and other documents start piling up. Luckily, short sales behave more like regular real estate sales and give the homeowners some control over the proceedings.
While this is the right solution for many, it does come with a risk of a deficiency judgment, where lenders can sue the delinquent borrower for the remaining balance on the mortgage — known as a deficiency — after the short sale. Most of the time, the lender is fine with taking on minimal losses with a short sale; however, this is not always the case. At Tadross Law, our short sales lawyers can negotiate with lenders to settle for a lower deficiency or waive it completely, leaving homeowners with the advantages of short sales listed above.