• Saratoga Springs Real Estate Agent

Short Sales Scoop

Jan 15th, 2011 | By | Category: Hot Topics in Real Estate

Marty Carbone Short Sales in Albany NY and Troy NYHomeowners looking to avoid foreclosure are faced with a number of options, one of which is doing a short sale. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he or she owes.

In order to qualify to list your home as a short sale, you must be able to show some type of financial hardship and the inability to make your monthly mortgage payments. The primary consideration above all else is the affect both foreclosures and short sales can have on your credit score.

The Basics of a Short Sale
The concept of a short sale is fairly simple but the process can be complicated. A short sale occurs when the sale proceeds of a house fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. However, not every lender will negotiate a short sale. For example, if your payments are current, yet you foresee imminent cash flow problems arising that will affect your ability to make your monthly mortgage payment. Lenders have no interest in negotiation unless your payments are several months late. Another consideration is you may be held liable for taxes on the difference between the sale amount and the original loan amount.

Without a doubt sellers will incur more damage on their credit report by going through foreclosure. Typically your credit score will take plunge between 200 to 300 points. Short sales have a far less damaging affect on a seller’s credit report. Credit scores typically lose between 80 to 100 points.

What happens to your credit down the road? It is takes around three years after a foreclosure before a lender will offer a sensible interest rate, whereas for a person who went through a short sale typically waits around 18 months to buy another home at a good interest rate.

Salvaging your credit should always be the primary concern when making the decision between a short sale and stopping foreclosure. The savings in interest payments alone should be convincing enough for most people, not to mention your buying power in the near and distant future.

On the buying side, if you are trying to purchase a home is a short sale situation, there are several factors to take into account. While the initial draw to buying a short sale is the possibility of purchasing the home at a lower price than a traditional sale, the buyer must be prepared, and in a position, to possibly wait several months before closing on the property.

The process of buying a short sale home can take much longer than a traditional purchase. The buyer must be prepared to wait several months for all of the necessary steps to take place on the seller’s side before being able to close on the property.

In some cases the seller may be going through bankruptcy and have to go to court to take care of their financial issues before the property can change possession. This process alone, may hold up the sale for several weeks or months.

Short sale transactions happen everyday and in some cases allow both the buyer and seller to make out better than they would if they had not participated in the transaction. If you have the patience and are in a position to wait, purchasing a short sale home can be to your advantage. There are also risks involved since the deal is very dependent on the financial issues of the seller.

If you don’t mind potentially waiting a very LONG time…don’t dismiss looking into SHORT sale homes.

(PHOTO CREDIT: lindaferrari.com)

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