As we started to feel the downturn in the economy, the increase in unemployment across the nation and in turn the increase in the risk of losing one of the big dreams from
each one, the dream home.
With the increase in unemployment, some terms come up more than others like
bankruptcy, foreclosures, debts, etc.. and the ways to avoid them.
Today, we are going to talk about short sales, how to
avoid foreclosure using short sales and why would a lender accept short sales.
What is a Short Sale?
When the house value falls below the outstanding loan, the short sale should be considered. For example, if your house value is $100,000 but your loan amount is $115,000.
This situation is assuming that you are facing foreclosure or behind on your payments but if you don’t want to sell your house, you don’t have to worry and you can wait until the market values appreciate again.
If you have to sell your house, short sales is the most recommended option. If you don’t go for the short sale, the remaining options are to try to sell your house for more than the loan amount, which will have slim chance to be sold in that price. (This still might depend on different aspects)
To qualify for a "Short Sale", homeowners must demonstrate a hardship and be financially insolvent. The homeowner should be able to demonstrate inability to make the loan payment. Most importantly, homeowners must prove a willingness to cooperate with the process.
Why would a lender accept short sale?
Short sale saves the lender from the costs of foreclosure and all the other problems that come with taking back the property. The costs of foreclosure can include not only legal fees, but also taxes, insurance and the expense of maintaining the home until the property is sold and repairing any property damage.
What is the advantage of Short Sale vs. Foreclosure?
Any option is better than foreclosure. Foreclosure is painful and embarrassing. Foreclosure effect on the credit is the worst, you can lose around 300 points. Foreclosure appears on your credit for 7-10 years and will make it harder to buy another house during that period.
With short sales, you retain some dignity in knowing that you sold your home. You don’t have to make mortgage payments during the short sale process unless you choose to. You might be eligible to buy another house in 2 years. If you act fast and start short sale before your credit report reflects late pay, you can save valuable credit points from running away.
So save your credit now and stop foreclosure, the faster you act before the delinquency is report to the credit bureau, the better.
For more information about short sales or other available options to sell your house in the Houston area and the surroundings, go to www.webuyhouseshouston.net
Jimmy Farag, Realtor with RE/MAX Southwest specialized in short sales and distressed properties.
