Most homeowners secure loans from banks to pay for their homes. During financial hardships, owners may not keep up with their mortgage payments. Instead of risking a foreclosure, they can consider short sales.
Since short sales differ from traditional home sales, homeowners should review these common questions and determine if a short sale is right for them.
When should a homeowner consider a short sale?
Homeowners experiencing financial difficulty may not have funds to cover their mortgage payments to their banks. After several months of no payments, the bank can issue a Notice of Default. If the owners cannot get their past-due balances caught up, one option is to ask the bank for permission to make a short sale. Short sales are beneficial because the banks allow owners to sell houses for less than the amount of the loan balance. The banks then usually forgive the unpaid balance of the mortgage.
Do all homeowners qualify for short sales?
Not all homes fit the requirements for short sales. The primary stipulation is that owners do not have any equity in the house. If a homeowner stops making payments, but the home’s value exceeds the loan’s balance, owners cannot request short sales. Instead, homeowners should attempt to sell the house for the full market value and retrieve as much equity from the sale as possible.
What are the credit implications of short sales?
Many homeowners want to maintain good credit to obtain another home after a short sale. While short sales negatively impact borrowers’ credit scores, the implications are less severe than foreclosures.
Homeowners having difficulty paying their mortgages should consider if a short sale can help them move toward a better financial outlook.