About Short Sales

What is a short sale?

A short sale is a negotiation with a homeowner’s mortgage company to accept less than the full balance of the loan.  It is one method in which to avoid foreclosure and often times is more beneficial to both the mortgage company and the homeowner.

What is the difference between foreclosure and short sale?

A foreclosure is the legal process in which the homeowner’s mortgage company takes possession of the property due to the homeowner’s failure to keep up with the payments.  A short sale is when the mortgage company agrees to settle for less than what is owed on the property.

There are several reasons why a short sale can be more beneficial than a foreclosure for both the mortgage company and the homeowner.  The process of foreclosing on a property is expensive for the mortgage company, so lowering the amount owed on the loan can be more cost effective.  For the homeowner, there are several reasons to avoid foreclosure.

First, a foreclosure can lower ones credit score anywhere from 200 to over 300 points for a good 3 years and stay on their credit report for another 7 to 10 years.  With a successful short sale, the credit report will only show the late mortgage payments and that the loan was settled for less than the full amount.  The lowering of the credit score is significantly less and generally only shows up for a year to a year and a half.

Second is in regards to future home purchases.  Loan applications require prospective buyers who have had a foreclosure in the last 7 years to disclose that information.  This may affect the interest rate and whether or not the loan is approved.  There are currently no questions relating to a short sale on loan applications.

Lastly, foreclosure is public record and looks bad for current and future employment.  Employers have the right to do background and credit checks and this could lead to hurdles finding employment and reassignment or termination.  A short sale is not public record and is reported separately on a credit report.  The employer will only see late payments and an account that has been settled.

Why hire an experienced professional?

Short selling your home can be an overwhelming and emotional experience.  That is why you need someone who is experienced and professional.  You need someone who has experience in the short sale process in order to deal and negotiate with the mortgage company on your behalf.  With an experienced agent you have a much better chance of successfully short selling your home.