What are Short Sales?

When it comes to foreclosure prevention, a short sale is an option that comes up very often. If you want to avoid foreclosure and your lender agrees, it’s worth considering a short sale.

How does a short sale work?

A distressed homeowner sells the property “short” by pricing it lower than the amount currently owed. Naturally, this only works if the lender agrees; if they do, the homeowner is able to avoid foreclosure and get out of the mortgage that is giving them trouble, and the lender doesn’t have to foreclose, take possession of the property, and auction it off at a greater loss.

It’s not a perfect solution, but it might be the best-case scenario when foreclosure is imminent. The downsides include damage to the homeowner’s credit, though it’s far better credit-wise than a foreclosure. The lender will lose money on a short sale, but not as much as they’d likely lose by going through with a foreclosure.

It’s not a given that a lender will agree to a short sale. They generally won’t say yes unless the homeowner has missed more than a few payments and has already been sent a notice of default.

There are advantages to the buyer in this situation, but there are a few extra hurdles to go through when buying a short sale. We recommend working with an experienced short sale Realtor if you’re looking to purchase a short sale.

Negotiating a short sale

Like any transaction that is designed to avoid foreclosure, we urge you to consult a HUD-approved housing counselor before you agree to anything. A counselor can help you understand all of your options, and will likely have a better idea of whether your lender will agree to a short sale or not. A qualified housing counselor can guide you through the negotiation, giving you the best chance to be successful in your goal of avoiding foreclosure.

No related posts.