When you buy a new home, you never expect you will ever come to the point where you might be losing it. However, although we are in financial recovery, for many people the downturn is still very real. The real estate market is still not very high, and the reality is that many people are in negative equity and face the possibility of losing their home completely. It is an incredibly frightening situation and one that cannot be ignored, unfortunately.
Those who face foreclosure, however, may have another option available to them as well. They may be able to short sale their house instead. Of course, this still means losing your home, but it is generally a better option than going through foreclosure. With a short sale, you are basically allowed to sell your property for less than what you owe on the mortgage. This means the house gets sold at a big discount, but it is done through a regular agent, just like with a regular house sale. So what are the benefits over going for a short sale, rather than a foreclosure?
Benefits of Short Sale
There are various benefits to going for a short sale rather than a foreclosure. The first, and perhaps most important one is the impact on your credit rating. Although there will be a negative marking against you on your credit file, it is much less severe than that of a foreclosure. Furthermore, this means that you will also be able to get a new mortgage through Fannie Mae within two to three years, as opposed to the seven years you will have to wait if you were to go through foreclosure.
Another benefit is the fact that you will not find yourself in front of a boarded up home. With a foreclosure, you are evicted and access to your property is removed. Your home will be put on the market for a very low amount of money, but it will only attract a certain type of buyer, generally an investor with no intention of doing anything nice to your property. With a short sale, on the other hand, your property will be properly shown by an estate agent and you can live in it until the sale has gone through. There is generally a time limit on this as set by the bank, but it is a lot more pleasant than finding yourself homeless without any real warning.
Understanding the process of short sale is quite complicated. Also, not every lender will agree to the process with you. However, the reality is that if you know you will face foreclosure, attempting to go for a short sale is always going to be a better option. You do, however, have to look into your options so you understand the process and make sure you get informed about the drawbacks of this type of process as well. However, if there really is no option but to lose your home, it doesn’t have to mean you lose everything at the same time.
by Fritz Quindt on Short Sale Blog
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