In today’s economic mess, many homeowners are learning that their homes are worth less than what they’re paying on monthly mortgage payments. Some people are continuing to pay on the mortgage, hoping for the housing market to turn. Some others have decided to let their new houses be foreclosed upon, deciding to take that hit and store up money to move to a place they can better afford. But there’s a third option that some people are taking that they feel works better for them, but it may not be their best option.
That option is known as short selling. Short selling is the process of selling your home for less than it’s worth. In this case, many homeowners in California and Florida are selling their homes and getting out from under terrible mortgage deals that have ended up crushing them. Lenders are happy because they don’t have to try to find someone to sell the home to, and at least they’re getting something coming in. Sellers are happy because it’s not recorded as a foreclosure, and they’re out from under debt that was giving them nightmares.
So everyone is happy, right? Well, not so fast. It seems that short selling might have a more detrimental impact on the seller than they thought it would. As stated in SmartMoney Magazine, there are three major negatives that can, and will, follow you should you decide on this option. They are:
1) your credit score takes a hit as if you were foreclosed upon;
2) the lender may still come after you for the difference between what you sold the house for and what it’s worth at the time of the short sale
3) if you needed time to build money up, a foreclosure offers you that opportunity, whereas with a short sale, in some states, you don’t have any protection after a short sale
So, even though lenders will be getting a small bonus back from the federal government for any short sale transactions, it may not be enough to keep them off your backs, and your credit score is going to suffer anyway. This is one case where doing the right thing might not be the right thing for you and your family.
It’s something else that homeowners in trouble have to deal with as they try to take care of their families in a tough economy.
See more:
http://homebuying.about.com/od/4closureshortsales/a/shortsalebasics.htm
http://real-estate.lawyers.com/residential-real-estate/Selling-Your-Home-For-Less-Than-You-Owe.html
http://www.debtkid.com/short-sale-agents
http://www.ehow.com/how_8132_short-sale.html
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It’s good to know, I really didn’t know the difference…
davidcs last blog post..Home Insurance: Coverage Options
There are always part that have more benefits from sale and others are just trying to compensate the expenses.
Fortunately here in Arizona, we are a non-deficiency state. One of those negatives goes away here. After the foreclosure or short sale, the lenders cannot come after you for the difference unless you sign something waiving that right. Just be careful when you sign those forms approving the short sale.
Steve Trangs last blog post..$149,900 :: 3504 E Coconino Way, Gilbert AZ, 85298
It’s amazing to me how many homeowners believe a short sale “saves” their credit. In my neck of the woods, a Seller typically has to be at least three months in arrears before the bank will consider allowing the short sale. This means that even if the short sale is approved, you’ve still got the credit penalty of those missed mortgage payments – which can lower your scores as much as 200 points.
Georgia doesn’t require litigation for foreclosure, so things happen quicker – or perhaps “less slow” is a better description. Short Sales should be a last resort and we in the trade should be educating our buyers about the impact of trying to seek that remedy. Nice post…
Joes last blog post..Can the $8,000 Tax Credit save VA Buyers ?
It is important to realize too that the amount you are short can be taxed if the bank issues you a 1099. I think most people don't realize this.