What is a 'Short Sale'?
A short sale occurs when a lending institution accepts a discounted payoff amount on an existing mortgage and agrees to help the homeowner with closing costs to prevent a home from going into foreclosure. Often times a homeowner owes more than can be collected through the sale of the home. In this case, a short sale allows them to sell the property to avoid foreclosure for themselves and the lender.
Why Would a Lender Do This?
Banks must avoid foreclosure at all costs - and here's why.
When a bank forecloses on a home it becomes a non-performing loan. This affects the amount of money a bank can borrow from the Federal Reserve. Since banks only make money by borrowing from the Fed and lending to the public, they must borrow as much as they can. Every non-performing loan reduces the amount the bank can lend to the public, affecting their bottom line profits.
The bank knows if the property is foreclosed, it goes to auction and is sold for what is owed on the first mortgage and typically not a dime more. This leaves the second mortgage holder getting absolutely nothing.
So for the bank it's a no-brainer...and it creates a win-win situation for everyone involved. The bank gets some money, but more importantly they keep a non-performing loan off their books. The homeowner avoids foreclosure and saves his credit.
How We Can Help
Conducting a short sale is the best way for a homeowner to get back on a positive financial path. We locate a buyer for the home on an accelerated schedule and work to close the sale as quickly as possible. Because of our experience in helping homeowners just like you avoid foreclosure, we can obtain favorable terms from your lender and help minimize any tax liability and long-term credit impact.
Don't Wait to Act
Unfortunately, a foreclosure can begin a downward financial spiral that can become irreversible over time. A foreclosure can remain on your credit history for up to ten years and can prevent you from qualifying for another home for quite some time. A foreclosure can make it difficult to rent a living place without other forms of collateral and can even complicate the financing of smaller purchases like cars or furniture.
However a short sale can either eliminate or minimize the damage of a foreclosure. First, you can avoid damage to your credit rating by not having a foreclosure on your financial record. Second, you can either avoid or lessen a deficiency judgment or tax liability during the short sale negotiation with the lenders. Finally, a short sale will give you a better credit rating and the time to find a new place to live without the fear of eviction.
For more information and to find out how Realty1One can help, please contact us today!
