A short sale is a home sale where the buyer takes a loss on what is owed. It is called a short sale because the seller gets shorted on the final outcome.
Most short sales happen during bad economies. Even if you fault on your mortgage, the bank will still be owed the difference from you owe and what the sale of the house would be. A short sale allows the owner of the home a chance to have more control over the price.
Negatives of a short sale
There are a few large disadvantages to short selling our home. This is why you rarely ‘want’ to perform this action.
You have little to no control over the actual process. Indeed, you are in control of listing the property and trying to get people to buy it, but that is kind of where this ends. The bank or lender still has to ‘okay’ sale. They also have to ok the date of the sale. And you have to fill out a lot of forms and documents that you would not have handled during a normal sale.
You don’t get the funds – your lender does. Because of the type of sale, all cash goes to the lender to pay off your debt. As well, you can also not count on having extra money for another home purchase of moving expenses from the sale.
Positives of a short sale
The benefits of a short sale of very focused. Because you are shorting yourself, you must get something out of it. Most of those ‘somethings’ involve not carrying the mortgage in your debts after the sale.
Save money on the costs and fees of the sale. Because the lender is so involved with the sale, you would think they would have you normally pay fees and costs associated with the sale. But this isn’t the case. In fact, for many of the costs and fees that you would normally pay during a sale, the bank or lender actually pays.
Your credit score can actually be helped. When you compare a foreclosure to a short sale and having no debt, you definitely are making out with a short sale. A foreclosure on a credit report can mean a few hundred points lost on your score. By using a short sale, your credit score can be maintained, meaning you can likely work towards getting a mortgage sooner.
Can First Choice help you out?
First Choice provides affordable and clear mortgage rates that our members find helpful. We do not allow our members to be set up for failure by spending above their means. And, when things start to go wrong when their finances and their mortgages are involved, we like to help.