Many homeowners are unfamiliar with short sales, the process and what it entails. This leaves property owners scrambling to learn more when they find themselves in a position where a short sale could be advantageous.
So what is a short sale and how is it different from a typical home sale? These are common questions.
A short sale typically entails the sale of a distressed property — that is, a property whereby the homeowners can no longer afford to remain in the home. Often, the residents have missed mortgage payments or are facing imminent foreclosure if they do not move forward with a short sale.
The short sale is so called because it involves the sale of the property for an amount that’s less than what’s currently owed on the loan.
So, for instance, if you owed $200,000 on a property, you would need to opt for a short sale in order to sell the home for $180,000.
Lenders typically view a short sale as preferable over a foreclosure due to the amount of time and paperwork involved in a foreclosure. And additionally, in the case of a foreclosure, the bank is left with a property that may only pull in a fraction of the loan balance at public auction.
Homeowners typically prefer a short sale over foreclosure due to the impact on their credit history. A foreclosure is more harmful than a short sale when it comes to the impact on your credit score.
The only downside to short sales is the fact that the lender must approve the short sale before the transaction can be finalized. In short, the property owner has no real control over the transaction. Lenders have been known to take weeks — even months — to approve short sale offers, although new legislation has significantly cut down on the timeframe for approving short sales, resulting in much faster transactions.
Navigating the short sale process can be frightening, as it’s quite different from a traditional home sale, but this is where you can benefit from working with a short sale expert like Kristine Zelazo, better known as the Short Sale Gal! Call Kristine today at 800.664.0616.