It is important to know your options with the amount of houses going up for foreclosure everyday and the economy the way it is. Doing a short sale on your house is one option.
Below you will find all you need to know about this great option.
A real estate short sale is when because of an economic hardship that you are facing the bank or mortgage lender agrees to discount your loan balance. What happens is you sell your mortgaged property for less than you owe on the loan, and turn the money over to the lender which will fulfill your debt.
In some situations though the lender has the right to approve or disapprove of the sale. Some of those situations are if the current real estate market is down, the lender will not approve the sale because they will make less money than they could. Also, depending on your personal financial situation, the lender may not approve the sale.
The reason many choose to do a short sale is because it prevents a home foreclosure. Many banks consider this a good option because typically these sales result in a smaller financial loss than a foreclosure. The advantages to a home owner are the fact that these sales are quicker and less expensive than a foreclosure, and many do not want a foreclosure on their credit history.
Lenders have a department, called a loss mitigation department, where all potential short sale transactions are processed. This department typically does not allow this form of sale until a Notice of Default has been issued or recorded where the property is located. Before the sale the lenders have to approve of any listing agent's or buyer's commission, which is one of the main reasons that non-brokered short sales with a facilitator save on the margin.
Depending lender, you may face a higher tolerance for short sales and mitigated losses. Some lenders have pre-determined criteria for these types of transactions but distressed lenders will usually allow any reasonable offer, after a loss mitigator approves. You may need to get approval from several people, such as junior liens, HELOC lenders, for second mortgages, and HOA, special assessment liens.
Real estate short sale is a much better idea than foreclosure because it will not hurt your credit report as much, it will save you a lot of time and money, and many lenders would rather a foreclosure whenever possible.
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