What Is a Short Sale?
A real estate short sale is when a third party or homeowner negotiates a discount on the payoff amount due to a mortgage company. This happens when a homeowner owes more money to banks and/or lien holders than what the property can currently sell. In order to sell a property that is “upside down” in equity, the bank must agree to accept less than what is currently owed on the property. This typically is done for a homeowner who is behind on mortgage payments and facing foreclosure. It is best when a homeowner is 90 days late (sometimes less) on their mortgage and has no alternative to settle up and not enough equity to sell fast.
How Do You Benefit From a Short Sale?
Short sale allow you to STOP FORECLOSURE and get a fresh start. A short sale may allow the seller to buy a new home again in as little as 2 years. A foreclosure remains on your credit report for 10 years, and you may not be able to purchase another home for 5-7 years.
Short sales are not reported on a credit history. It will typically be reported as “settled”, paid as agreed,” “paid as less than agreed.” or something similar. Current or future employers running a credit check will see foreclosure, but then they will not see a short sale.
Deficiency judgments may be negotiated between the homeowner and lender in a short sale, and a good negotiator is often able to negotiate NO deficiency judgment. On the other hand, banks do not negotiate deficiency judgments after a foreclosure, and you will likely have a judgment filed.