Benefits of a Short Sale
The real estate market is thrilling; things are going on all the time in the market that can lead you to bite your nails. Similarly, foreclosure can be a nightmare for most as it results in losing one’s house. Can you imagine how stressful it might be for you to lose your house because of foreclosure?
While foreclosure is scary, you can lessen the damage that it may cause by going for a short sale instead.
A short sale is when you sell the property for much less than what you owe to the mortgage lender. In this scenario, if the lien holders consent to accept less than the sum due on the debt, the selling of the property can be allowed.
A short sale has many benefits. Read below to find out some of the benefits of a short sale that can help you save your damaging reputation and credit score:
1. Shorter Wait Time
Short selling will go to your credit report as a debt that has been dismissed but not compensated in full. The record would stay open to prospective creditors for up to seven years, so with a short sale, you will be eligible to apply to buy another house faster than you will after a foreclosure. Under the Fannie Mae Regulations, borrowers may be qualified for a home buying loan two years after a short sale instead of 5 years after a foreclosure.
Moreover, lenders will be somewhat more inclined to lend mortgage resources in the future to anyone who goes through a short sale instead of a foreclosure. A short sale can be a great way to show that the homeowner is trying their best to pay off the loan and are not defaulters. With a short sale, you can save a lot of time that you would waste otherwise in the court proceedings.
2. Possibly Less Damage to Your Credit Score
It is a controversial issue. Some reports have suggested that short sales and foreclosure are similar when it comes to destroying your credit score. Many reports claim that a foreclosure will reduce your credit score by as many as 200 points higher than a short sale. Another way you might minimize the risk to the credit report for a short sale is by staying up on all the mortgage payments before the sale closes.
A substantial portion of your score is dependent on your records of prompt payments, so late or missed payments would diminish your score by several points. A short sale will be a blessing in disguise for you if you are worried about damaging your credit score.
3. Psychological Comfort
For certain individuals, losing their houses to foreclosure brings both a social and a moral burden. In the end, these owners may become more comfortable with attempting to discharge as much of their financial obligation as they can, rather than walking away from their mortgages.
Short selling is not a simple procedure, and you will need the help of the lender. You will still be financially accountable for certain aspects, such as home equity payments and income taxes, but short selling could also be a safer overall choice for certain individuals.
4. It can benefit investors.
There is no assurance for any transaction, so the term “foolproof” will never fall into the mindset of a potential investor. But a professional investor will do well for themselves, and at the same time, will help distressed homeowners, including short sales.
Purchasing a house on short sales can be beneficial to a buyer in a variety of ways. It provides below-market-value buying rates, affordable sales charges, and you can easily have access to the home details. The growing popularity of the short-selling market will give an intelligent investor a variety of incentives. A short-selling investor would often have the opportunity to hammer out deals with homeowners, like renting their properties back to them or putting up a functional arrangement that would give them a chance to restore their reputation.
5. It Gives Homeowners More Control.
Once you receive the foreclosure notice, it might be hard for you to sleep the next few nights. The mailbox begins to fill in with legal notices and complicated papers, followed by frequent communications with the lender’s team of lawyers. Negotiations, talks, and documentation with the homeowner to go in will be underway in a short sale.
But the procedure of a short sale is much like a traditional sale, as compared to a disputed and pressure-packed foreclosure case. Real estate sales are usually difficult, but a short sale would enable the seller to take a more active role in the transaction and deal with the bank, the homebuyer, and the realtor. All in all, short selling is much more feasible for the homeowner than those at the hands of the bank’s lawyers during the foreclosure.
Knowing that you will be unable to pay the mortgage payments can be very frustrating, especially when your house is at stake. But it is essential to take some measures when you face such situations. Take a step towards the right direction and ensure that you deal with the curveball thrown at you properly. When juggling between foreclosure and a short sale, it’s always best to go for a short sale since it has multiple benefits above all other options that you might have.