Sometimes, homeowners find themselves in a sticky situation when they suffer a major loss and can’t afford to make their mortgage payments every month. Perhaps they’ve been laid off at work, or they were diagnosed with an illness and have expensive medical bills hanging over their head. Maybe their home flooded or they were the victim of a house fire, and their property is now worth far less than their original home loan. For many, the result is foreclosure. But this doesn’t have to be the case!
Understanding Short Sales
If you have found yourself in any of the situations listed above, don’t lose hope. In many cases, a short sale can save you from having to suffer an REO foreclosure. So what is a short sale? Essentially, when you owe more on your home than the property is actually worth, you have the option of selling your home for less than the remaining amount you owe on your mortgage. This is advantageous for both the homeowner and the mortgage lender, as the lender gets the remaining amount they are owed while the homeowner avoids total foreclosure.
The catch to short sales is that the homeowner does not make any money on their home sale — it all goes to their mortgage lender. However, this can set them up for success in other ways, especially when it comes to their credit score. Few things do more damage to your credit than having a foreclosed home, and a short sale allows you to avoid taking a major hit to your credit score. In order to buy another home in the future, or to make any other large purchase for that matter, you’ll need good credit to get approved for another home loan. When you make a short sale, this completely pays off the debt you owe your mortgage lender, which gives you a cleaner slate to purchase a new home down the line.
The Difference Between Short Sales & Foreclosure
Not many homeowners know what a short sale is, much less how it differs from foreclosure. As previously mentioned, you won’t suffer as much of a hit to your credit score if you make a short sale instead of being foreclosed on, though you still won’t get any of the proceeds when your house sells. However, there are some other key differences to note:
The short sale process and foreclosure process vary, with short sales granting the homeowner more of a voice in the decision to sell the house. If you are in financial distress and are looking to make a short sale, you’ll need to meet with a REALTOR® who specializes in short sales and can negotiate with your mortgage lender. If your lender approves of the short sale, they are allowing you to sell the house for less than you still owe on the mortgage, which still gives them a chance to make a profit on the sale. On the other hand, foreclosures are often enforced against the homeowner’s will, and there is no process of negotiation between the lender and the homeowner. When it comes to short sales and foreclosure, a little communication can go a long way.
The timeline for short sales also differs from foreclosure. Short sales generally take longer to close, given that the home is being sold to a home buyer rather than directly given up to the mortgage lender. When you are being foreclosed on, you will have a certain amount of time to gather up your things and be out of the house before the bank steps in. This is because the lender wants to reclaim what’s theirs, and all they’re concerned about is recovering the property, cleaning it up, and selling it as an REO property.
Make A Short Sale In Shreveport With REALTOR® Laura Dean
Whether you are facing foreclosure or you recently had a major life change that affects your ability to make monthly mortgage payments, it may be time to consider a short sale. Contact REALTOR® Laura Dean today to learn more about short sale homes in Shreveport and the surrounding areas, and book a free consultation today! I’d love to work with you and help you avoid an REO foreclosure.