For a homeowner who is trying to avoid foreclosure but feels that it may be their best choice, considering whether a short sale would be a viable option is important. Part of the reason this is sometimes overlooked is because the qualifications and benefits of a short sale are misunderstood or not understood at all.
A short sale is an agreement that is mutually beneficial to both the homeowner and the lien holder. It enables the homeowner to sell their home even if it is for a lesser amount than what is actually owed, instead of having it foreclosed on. While there are negative credit implications to all borrowers of the loan as a result of a short sale, the impact is less severe and shorter-term than that of a foreclosure. Some may even qualify for a new mortgage as soon as a year following the sale. In order to qualify for a short sale, a homeowner generally must already be in default or be likely to go into default soon, and have no assets available to satisfy the debt. Additionally, they must have experienced a qualifying financial hardship such as divorce, death of a spouse, loss of job, military service, or natural disaster. Additional hardships may qualify and mortgage lenders’ loss mitigation departments should be able to assist in determining whether specific situations would.
The short sale option also benefits lien holders, as it allows them to recover some of the debt and not require the lengthy and costly foreclosure process. Many will agree to fair terms of a short sale in order to accomplish this. It is important to note that all lien holders must agree to the terms with the homeowner in order for a short sale to be possible. Therefore, if there is more than one (1) lien holder due to a second mortgage on the home, both parties must agree to accept less than what they are owed. The selling price of a short sale home will be at or below the appraised value, as an amount greater than the appraised value would not attract buyers and securing financing for a greater amount would not be attainable.
After the lien holder(s) agree to allow the sale for less than the appraised value and less than what is owed to them, the next step in the process is securing a buyer for the property which can come with additional expenses to the homeowner if a real estate agent assists with finding someone to purchase the property. Eliminating the need for an agent in the sale is ideal, in order to avoid this cost during a time that is already financially difficult. Companies like Property Redevelopers LLC can help with this final step without requiring a real estate agent, by potentially purchasing your house for cash.