Many individuals may not fully understand what a short sale is. Let me explain for you. Let’s say you buy a home for $100,000. Now because of the economy, or many foreclosures in the area, you home is only worth $75,000. You have been making payments but because of interest and how loans are amortized you still owe $95,000. If you want to sell, typically you have to come up with the $20,000 plus closing costs to sell this home and satisfy the loan to the bank. In a short sale, if you have a hardship of some nature (i.e. job loss, cut in hours at work, unexpected emergency, etc.) that is causing you to be late on your payments, you may qualify for the bank to forgive that $20,000 debt and allow you to sell your home.
There are situations, however, where banks will agree to the short sale, so you can at least get out from underneath the debt of the entire home and carry the difference ($20,000) on payments for you on an unsecured loan (no collateral).
There are many options with a short sale and many scenarios can occur. It depends on the amount of money as well as the bank. However, if you are in a hardship situation, it may be a good idea to consult a professional of your options.
If you enjoyed this article, please consider sharing it!
Bryan, there is such a need for the general public to learn what a short-sale actually is, the process and what a short-sale means for the home seller. We look forward to additional posts helping demystify the short-sale process. Great information! Thanks Bryan.
Generally, people don’t understand the difference between short sales and foreclosures. Thank you for sharing what a short sale is — very helpful!
A short sale can be the best alternative to selling when your home when you owe more than it’s worth. The banks have become more lenient in allowing people to short sale their homes because the alernative which is foreclosure can be more costly to you and them.
Buying houses via short sales definitely has it’s advantages, and following the Real Estate stocks can give a heads up in timing the real estate market