Short sale real estate transactions have gained prominence following the most recent slump in the housing market. As people started to lose jobs, homeowners were left with no means to pay off the remainder of their mortgages.
Short sales allow homeowners to sell their properties with the consent of the lender by which the home is mortgaged to. Any proceeds from the sale will be given to the issuer of the mortgage loan as payment for the balance of what the homeowner owes them. Most of the time, this is not enough to cover for the whole loan but an agreement can be made between the seller (homeowner) and lender to discharge the balance – or at least transfer it to the new owner.
A short sale is preferred over foreclosures because usually, the home can be sold for a higher amount. However, you need to to know the signs first – otherwise, you might make things a lot more worse for your financial standing.
Obviously, you are considering this because you are unable to pay for your mortgage anymore. But how will you know if short sales are better than foreclosures?
One of them is the effect on your credit history. If you are concerned about this (as we all should), then you should resort to this transaction over the latter. While a short sale technically has the same effect as a foreclosure, you will benefit from the fact that your late mortgage payments will not be as lengthy. Foreclosed properties can only be sold a year after it is submitted – this will reflect negatively on your payment history as you will not be paying the monthly amortization during this process. In short sales, you can be done within months – after which the debt could be written off.
Another sign that you need a short sale is when the value of your home drops lower than that of the loan you too out in the first place. If the property is now worth $120,000 as against the mortgage of $150,000, you may want to consider getting in touch with your lender to propose this.
You should also look into short sales if your mortgage payment is going or already on default status. The lender will not entertain anyone who does not have a real financial crisis. When you apply for this, the lender will analyze your case to deduce if you are really unable to pay off the monthly amortization anymore.
One other indication that a short sale is inevitable is when you want to be relieved of house-related fees like HOA’s and something similar. With this transaction, you are permitted to stop future fees since the home is no longer your property. This can save you up to thousands of dollars in the long run.
You need to understand that in some cases, the homeowner, or seller at this point, may or may not be forgiven the remaining balance on the debt even after the sale of the home. If you wish to know more about short sales in South Florida, feel free to get in touch with us. Our goal is to help you find the best transaction for your short sale to help relieve you of your mortgage problems.