Short Sale Knowledge for You

Personal Finance

We have all felt repercussions from the failing economy in one way or another. Many have resorted to bankruptcy, foreclosure and even job loss, therefore a popular term that you probably see quite frequently is “short sale”. A short sale is the sale of real-estate at a lower amount that is agreed upon between the borrower and the lender, to prevent the home owner from ruining their credit and to prevent the lender from accruing large fees and ultimately a substantial loss.

If you have to make the decision to sell your home via the short sale process due to job loss or loss of income, my heart goes out to you and I hope you and your families circumstances change for the better. It can be very difficult to let go of not just your house but your “home”, which in some instances a life time of memories were created. Just keep your head up and remember memories are stored in the heart and not via tangible items.

When you are at your ends wit and feel that nothing good could come out of your situation, pray and remember to ask for assistance in the correct fashion and if it’s in god’s will then it will be done. Now that I am done preaching, let me get back to short sales. Popular questions in reference to short sales can be found all over the internet. I figured I would take the liberty to answer a few of the most popular questions today as accurately as possible.

Questions:

1. If I go the short sale route, what happens to the deficiency balance?

Answer: In many instances you will still be required to pay the deficiency balance and would be contacted by the lenders loss mitigation dept to setup payment arrangements or the bank may come to terms and offer a settlement in which the bank would accept a certain amount and charge off the remaining balance. Please beware that you will still receive a 1099 at the end of the year for the charged off balance.

2.  If I go through the short sale process, will it damage my credit?

Answer: Short sale is viewed as a type of settlement and usually has fewer implications compared to a foreclosure. Short sales do not reflect on the credit report according to the Distressed Property Institute. In most circumstances your credit can be restored within 18 months, typically allowing the purchase of a new home within 3 years. In some instances the lender will forgive your deficiency balance but in others they may be vindictive and report falsely and negatively to your credit report causing serious damage.

3. What’s the down side to short sales?

Answer: Short sales are contingent on the lender and must be consented by the lender and borrower. However consent can change at any time. The borrower may attempt to refinance or be obstinate and decide to go down the foreclosure path. Or your lender can change the terms, it’s often best if you contact an attorney to make sure you are presented with fair options.

Again, I thought by answering a few of these questions would benefit you, while you go through this long and daunting process. If you have other questions and concerns please don’t hesitate to stop in and ask. If I don’t know the answer, I will take the time to research it and follow up promptly.