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If you are behind on your mortgage and no longer can afford to stay in your home, you may be able to sell your home and avoid foreclosure with a short sale.
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Why do lenders allow short sales?
Typically, once borrowers default on a loan and notice of default is assigned, the mortgage company will analyze different scenarios to determine how to recoup the most on their investment. Among other factors, followings are four main factors:
1. The foreclosure process costs extra money.
2. They may have to make repairs on the property (especially in foreclosure situations).
3. There are carrying, holding, and maintenance costs associated with foreclosure.
4. They will have to carry property insurance on your property.
5. They are not in the business of owning real estates.
These reasons will allow the bank to consider taking less that what is currently owed on a property. The lender will typically want their money now as opposed to getting the same amount of money six-twelve months from now.
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What are advantages of a short-sale?
When handled properly, short-sale offers several advantages over other foreclosure methods:
1. Owners may stay at the home during the short-sale process.
2. Owners may qualify up to $3,000 for moving.
3. Certain debts may be forgiven.
4. Lesser negative marks on credit report.
For those reasons, short sale is often preferred over other foreclosure methods. Click here to learn more details on short sale benefits.
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