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Beware the lure of doing a "short sale"
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As many homeowners scramble to cover their mortgage payments on houses they can't sell, the concept of the "short sale" is gaining steam.
The concept is fairly simple. Sell your house for whatever it will go for - often tens of thousands less than the mortgage payoff - and then convince your lender to forgive the difference.
Sounds awfully appealing, doesn't it! I talked to several Tampa Bay area real estate brokers this week about the short-sale concept and what they think of it, and the key message is: Be aware of the consequences if you decide to try it.
Consider what a short sale will do to your credit rating, and to your ability to buy a house in the future. And perhaps most important, remember that a lender isn't automatically going to go for the idea.
Here's the rub. To even get a lender to pay attention to your problems in the middle of this housing market meltdown, the real estate brokers told me, you often have to be behind by at least 60 days on your mortgage payment. What this means is that the clock towards foreclosure is already ticking, and your credit is already going to take a hit, no matter what happens next.
What happens next is the big question. Sure, the lender might go for a short sale and help you escape your mortgage without foreclosure. But what happens if the lender says no and you are already well down the road to foreclosure, with a large payment required to get you caught up?
With that in mind, the real estate brokers advise that pursuing a short sale can work, but that you should look at it as one of your last resorts, not as some magic solution to your problems - where there is no risk and no potential for extremely tough consequences.
An excellent explanation of a short sale and its potential risks can be found on www.about.com in its homebuying section, at http://homebuying.about.com/od/4closureshortsales/a/shortsalebasics.htm .
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