In a short sale, your lender agrees to let you sell your property for less than the balance you owe on your mortgage. The answer to the question “What is a short sale?” depends upon who you are: homeowner, lender or realtor.
A Short Sale is a Positive Alternative to Foreclosure
If you need to sell your home and can no longer afford to make your mortgage payments, a short sale is one option available to you. Whether you should do a short sale or let your property go to foreclosure depends on your situation. In most instances, a short sale makes more sense than foreclosure.
- When you want to obtain a loan to purchase a property in the future, more opportunities will be available to you if you do a short sale.
- Contrary to popular belief, you can be current on your payments and still do a short sale. In fact, if you are current on your mortgage through a short sale, you can qualify for an FHA loan afterwards without any waiting periods. The same option will not be available following a foreclosure.
- You may qualify for cash incentives by doing a short sale rather than going through foreclosure.
- In Washington State, a homeowner can lose their property to foreclosure to the 1st mortgage lien holder and still owe the balance from the 2nd mortgage or other lien holders.
- Doing a short sale often reduces your credit score by as little as 60 points, versus 200 to 300 points for a foreclosure. There are many more benefits to choosing a short sale over foreclosure, which can remain on your credit report for five to seven years. With a short sale, you are in control of the sale, not the bank. You may sleep better at night knowing who is buying your home, and you can spare yourself the social stigma of foreclosure.
A Short Sale is the Preferred Choice for Lenders
Why would a lender agree to takes less than what they are owed? By accepting less than the amount owed to pay off a loan now, lenders avoid taking the property back by foreclosure and trying to sell it later. Lenders agree to a short sale because they believe it will net them more money than going forward with a lengthy and costly foreclosure process.
A Short Sale is a Highly Specialized Real Estate Transaction
A short sale is a very complicated real estate transaction and one that has very important implications for you. More than any other type of residential real estate transaction, a short sale should be handled only by a real estate broker who has substantial experience with the short sale process in Washington State, and a strong track-record of success in negotiating short sales for their clients.
Do You Qualify for a Short Sale?
Every situation is unique, but the general criteria for qualifying for a short sale are:
- You need to sell your home.
- You owe more on your mortgage than your home is worth.
- You have a personal financial hardship that will prevent you from making future payments. (Examples of hardship include loss of job, reduction in income, divorce, death of a spouse and medical emergency or illness.)
Have You Applied for a Home Loan Modification?
Many people don’t realize that even though you have applied for a home loan modification, the foreclosure process clock keeps ticking. The lender will continue to move forward with the foreclosure process as the loan modification request is reviewed. If your request for a home loan modification is denied, you need to have a Plan B in place to avoid foreclosure.
Every homeowner’s situation is different, so we always recommend that you speak with a professional who can advise you on the legal and tax implications for your circumstances.
Washington Property Solutions
Windermere Real Estate /East Inc.
11100 Main Street, Suite 200, Bellevue, WA 98004