If you have suffered a financial hardship and cannot continue to make mortgage payments a short sale may be an option for you.
What is a "Short Sale"?
In brief, a short sale situation is when a homeowner owes more on their home than the market value of the property and does not have the financial ability to make up the difference or continue making monthly mortgage payments and the lender agrees to accept an amount less than what the homeowner owes when the property is sold. A number of life circumstances - divorce, family tragedy, illness, career change, lose of job - can cause a homeowner to fall behind on their mortgage payments. Sometimes it is simply that the mortgage payments on an adjustable rate mortgage have reached a point that the homeowner can no longer afford them. The objective of the short sale is to get the property sold and for the homeowner to avoid a foreclosure which is devastating to their credit, and for the lender to avoid the foreclosure process and associated expenses.
How do I qualify for a Short Sale?
If you have missed a mortgage payment as a result of a demonstrable financial hardship, and if your monthly expenses exceed your monthly income, and if the balance owed on your mortgage(s) exceed the market value of your home, and you have no other assets that you can use to pay off the mortgage(s) upon sale, then you will likely qualify for a short sale.
Benefits of a Short Sale
Compared to a foreclosure, there are a number of benefits to the short sale home seller.
Your Credit A foreclosure will lower your credit score from 250 to over 300 points affecting your credit score for over 3 years and will remain on your credit history for 10 years or more. A short sale will lower your credit score by as little as 50 points affecting your credit score for as little as 12 to 18 months and is not reported on your credit history.
Future Mortgage Loans With a foreclosure the interest rate you receive on future mortgage loans will be affected for a period of 7 years and you are ineligible for a Fannie Mae loan for 5 years after the foreclosure. There is no similar impact on your mortgage interest rate with a short sale and you are eligible for a Fannie Mae loan after 2 years.
Current & Future Employment Foreclosure’s appear on credit reports and may negatively impact current or future employment. A short sale is not reported on a credit report and therefore is not a challenge to employment.
Security Clearances Outside of conviction of a serious misdemeanor or felony, a foreclosure is the most challenging issue against a security clearance. If a person has a foreclosure, in almost all cases the security clearance will be revoked and the position terminated. A short sale on its own does not challenge most security clearances.
Credit Cards / Other Loans With a foreclosure on your record it is very difficult to obtain other consumer loans such as auto loans and almost impossible to obtain a credit card. A short sale does not have the same consequences as it is not reported on your credit report.
Deficiency Judgment In a foreclosure, the mortgage lender has the right to pursue a deficiency judgment against the homeowner for the amount of the mortgage that is not paid. Often times the house sells for less after it has been foreclosed than if it had been sold subject to a short sale approval resulting in a higher deficiency judgment against the homeowner. In some short sales it is possible to convince the mortgage lender to give up the right to pursue a deficiency judgment against the homeowner.
If you believe you are in need of a short sale transaction contact us for a confidential interview to determine if you are likely to qualify and if we can help you with the sale of your property.