If you have been struggling to keep up with monthly payments, you may owe more on your mortgage than the market value of your home. Even if you were to sell, the money you receive from a buyer may not be enough to pay off your loan if you do not have enough cash on hand.
A short sale may allow you to avoid foreclosure on your home while helping you and your family get out of debt. In this type of sale, you negotiate with your bank or other lender to repay your loan at less than its full value.
Why would a lender agree to a short sale?
Agreeing to a short sale means a loss for your lender. However, receiving partial payment on your home may be preferable to carrying it in foreclosure. In addition to avoiding legal fees and carrying costs, a short sale means your bank does not have to worry about making repairs or maintaining a vacant property.
Do you qualify for a short sale of your home?
In most cases, to qualify for a short sale you must prove to your lender that you have experienced long-term hardship that has made it impossible for you to continue making payments. Your lender may not approve a short sale if you are eligible for a loan modification or refinance.
What are the advantages of a short sale over foreclosure?
In addition to avoiding a default on your mortgage, a short sale may have less of an impact on your credit rating than foreclosure and a shorter waiting period before you are eligible for a new home loan.
Additionally, with a short sale you can continue living in your home until the closing date and have more control over the process of selling.