For homeowners who can no longer afford to pay their monthly mortgage payments, there are alternatives to bankruptcy or foreclosure . One of those options is called a “short sale.” In the simplest of terms a short sale means that the lender is discounting the total loan and accepting less than the amount owed to avoid foreclosure or bankruptcy. For example, let’s say you have a mortgage amount of $ 175,000 and you are no longer able to make your monthly payments and are facing a possible foreclosure. A buyer offers the lender a signed contract for $120,000, which is accepted as full payment for the loan. This is a short sale.
Why would a lending institution accept a short sale?
One of the reasons banks are allowing people to short sale their homes is because of programs like the Making Homes Affordable program/ Home Affordable Foreclosures Alternative or HAFA. Created by the government helps homeowners sell their undervalued homes waiving all deficiencies and in some cases even provides relocation assistance funds to help them move.
Another reason a bank or mortgage company may accept a short sale is that they do not like excess inventory and bad loans on their books; therefore, if they see an opportunity where they can sell the property without a huge loss, they will most likely do it.
If you are facing foreclosure a short sale may be an option for you. You could possibly avoid the foreclosure process and in a lot of cases the lender will forgive a portion of your current loan. Although this sounds like an easy way out, there is a catch. Short Sales have a high probability of damaging your credit and the lender may not agree to a short sale or to forgive part of the loan. Most lenders will only entertain the idea of a short sale if you are several payments behind or if you have gotten a default notice and they will not always forgive the balance of the loan.
Not all sellers nor all homes qualify for short sales. Contact the lawyers from Attorneys and Debt Counselors today to find out if a short sale may be a viable option for you.
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