The Benefits of a Short Sale
A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency. (From Wikipedia)
| Issue |
Foreclosure |
Short Sale |
| Can I get a Mortgage in the Future? |
The current Fannie Mae Guidelines require you to wait 5-7 years before getting a new loan. |
Current Fannie Mae Guidelines allow you to purchase another house after 2 years. |
| Can I get a future loan from any mortgage company? |
Any future application will require you to answer Yes to the question: "Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?" |
You'll be able to state No because you short sold your home. You only have to say yes if the bank completes the foreclosure. |
| Credit Score Impact |
Your score is typically lowered by 250 to 300 points, or even more. This often stays on your credit score for over 3 years. |
Only late payments show up. After a short sale, the mortgage is reported as "paid in full". This lowers your score as little as 50 points if all other payments are being made. Often times, this is off your credit report in as little as 12 months. |
| Will I owe the bank any money for the shortfall? |
Many lenders take 12-18 months to foreclose upon a property and resell it. This dramatically increases the loss and makes any deficiency judgment potentially bigger. |
Very few lenders ask for a promissory note on a short sale. When they do ask for one, they usually request the borrower repay them a fraction of their loss. |
For more information, click here to contact us and we'll guide you through the process.
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