When you can no longer make your monthly mortgage payments, or when it no longer makes financial sense for you to continue with your mortgage, it may seem like there are not a lot of options beyond foreclosure. Fortunately, a lot of people have discovered that short sales are a great way to get out from under their mortgage having to pay huge fees to the bank or long-term damage to their credit report.
A short sale is a process in which a homeowner is able to avoid foreclosure. In general, a homeowner makes a deal with their bank for the bank to accept the selling price of a house in lieu of the total amount of the mortgage. In exchange, the bank agrees not to pursue additional debt collection, and they have the chance to get a higher selling price for the property than if the bank tried to sell it after a drawn-out foreclosure process.
To start, a homeowner has to call their bank and tell their loan representative that they are interested in pursuing a short sale. It’s not necessary to be behind on your loan payments. After this, the loan representative will work with the homeowner to set up a short sale schedule and some rules. Homeowners typically have to agree to hire a realtor and have the home available for showings. It is also common for banks to set a timetable for homeowners. Usually, a short sale will have to go through within a couple of months in order to avoid foreclosure.
After agreeing to terms, a bank will send an appraiser to the home to figure out its market value. A bank will try to get a price as close to this market value as possible. Throughout the process, the homeowner will not have to make payments but they will get to remain living in the home. The home must be ready to be shown, and kept in a condition so that it appeals to buyers.
After an offer has been made and been approved by the bank, the short sale will proceed like any other real estate sale. As soon as the sale is complete, the former homeowners will need to move out immediately. Not following the conditions of a short sale will typically cause the bank to withdraw from the deal and start foreclosure proceedings.
Typically, a short sale will stay on a person’s credit history for about two years. During this time, it can be difficult to obtain a new loan, and some rental housing might not be available. In general, however, people who have gone through short sales report having only minor problems with getting a needed loan or rental housing.