In today’s challenging market, many of our clients are facing the unfortunate reality that their home is worth less than what they owe on it. A short sale is the process through which a mortgage company agrees to settle for less than what is owed to them.
If you are facing this possibility, we can help!
Short Sale VideosAt McGeough Lamacchia Realty, we feel it is important to provide you with as much candid information as we can to help you understand how to do a short sale on your home. Whether we are discussing “The Truth About Short Sales,” or “You Can Do a Short Sale Even if You Can Afford Your Mortgage”, each video provides you with valuable insight on how we do Short Sales. Don’t be misled into thinking a Short Sale can be done by any agent because that is not the case at all. Thanks for watching!
The Basic Facts About Short Sales
Why Do a Short SaleDo not be misled into thinking that there needs to be some profound reason to do a short sale. There are countless reasons on why you may need to sell your home. Some of these include affordability, divorce, employment, relocation, or even the home itself. So let’s discuss in more detail the true benefits of doing a Short Sale versus some of the alternatives like foreclosure, renting the home out, or not selling at all:
1) Debt Forgiveness
One of the biggest benefits of a short sale is usually getting all remaining debt forgiven. As an example, if your mortgage is $300,000 and you sell the home for $200,000, then the remaining balance of $100,000 will be forgiven by the bank, which includes closing costs, condo fees, real estate commissions, property taxes, etc . Many clients have a hard time believing that such forgiveness is possible or that their bank would ever agree to this. As irrational as your bank may seem, they do listen to dollar signs and national statistics prove that a Short Sale will sell for 26% more than a foreclosure.
And that doesn’t even include the cost to foreclose and additional mortgage payments missed. Every single day, we are getting short sale approvals that state in writing that the balance of the mortgage is being forgiven and the debt is settled!
2) Credit Impact
The lesser impact on your credit is another benefit both short term and long term of a short sale. If you are behind on payments, the sooner you sell the sooner your credit will improve. If you are current, the impact to credit is minimal but removing such a large debt from your credit report can be positive as well. Whether you are current on your payments or drastically behind, a short sale is much better than a foreclosure. Remember, being behind on your mortgage is where the majority of the credit issues come from. For more information on this, click to view our video: Credit Effects of a Short Sale
3) Buying Again
Another big benefit that our clients often consider is the ability to purchase a home again in as little as 2 years after doing a short sale which turns into double or triple that amount of time after a foreclosure. Just because this home has not worked out does not mean that the dream of owning again is lost forever. Plenty of our clients have already bought homes again or are planning to buy another home shortly. The lessons learned in this home, both positive and negative, can prove to be very helpful when looking to purchase again.
4) Selling With Dignity
This benefit should be higher than #5 but we never like to push some moral obligation onto our clients. Many of our clients do not want to go through the humiliation of having the bank hold an auction on the front lawn and take ownership of the property. Not to mention, having the home abandoned and winterized lends itself to frozen pipes and vandals. For some, the impact this will have on the neighborhood weighs heavy on their decision as well. There is no question that a short sale is a more dignified and responsible approach to selling a home versus a foreclosure.
The benefits to do a short sale are many but the reasons to do one can be summarized by asking yourself two questions. The first question is, “Do you need to sell your home?” The second question is, “Do you owe more on your home than it is worth?”
If you answered yes to both of these questions then a short sale may be the answer.
Does Your House Qualify for a “Short Sale?”
If your equity has disappeared, if your interest rate has readjusted higher, if you cannot afford the payments, or even if you just feel it no longer makes sense to own the home, then your house is eligible for a “short sale.”
Will You Owe the Bank Any Money Afterwards?
Most of our short sale clients pay absolutely nothing to sell their home, and walk away owing nothing to their lender(s). Many of our clients walk away without the stain of a foreclosure or a bankruptcy on their credit, and instead of having to wait up to 7 years to buy another home, they are eligible to borrow money and buy again within the next 24-36 months.