Is your home close to foreclosure and you need a way out? Consider the pros and cons of a short sale to find out if it is the right way to avoid foreclosure.
The number of foreclosures in the country just keeps going up. Some people are turning to a mortgage short sale to keep them from going through a foreclosure. Find out what it is and how it works.
What is a Mortgage Short Sale
A short sale is when a property is sold for less than what is owed to bank or the lender. It is used by people who owe more than their home is worth, or by those who can not make their mortgage payments and may be facing foreclosure. The name comes from the bank coming up “short”.
In order for a short sale to happen, the bank needs to agree to it. When the property is listed with a real estate agent it is listed as a short sale, and every offer is submitted to the bank for their approval. They have the right to reject an offer if they don’t like it. Once approved everything goes as normal, and the proceeds from the sale go to the bank.
The Advantages of A Short Sale
Although a short sale will still negatively affect a borrowers credit, it is not as severe as a foreclosure. It also allows a homeowner to get out from under the debt.
The Disadvantages of A Short Sale
Although you get out of your home without a foreclosure, you may not be completely forgiven for the debt. If it is forgiven, it is considered capital gain and will show up as taxable income at the end of the year.
A short sale can also benefit a buyer who is willing to go through the process in order to get a good deal on a home.
*Affects pricing. With the No Closing Cost
Option, borrowers finance the closing costs instead of paying for them at
closing. Borrowers who pay closing costs at closing may qualify for a lower
interest rate. Some upfront fees (ex. credit report and appraisal) may apply
and may be credited at closing.
*Refinancing or taking out a home equity loan or line of credit may increase
the total number of monthly payments and the total amount paid when compared to
your current situation.
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