The Pros of doing a short sale
There are many reasons why you might consider a short sale. In this blog, we will consider these points.
- Short sales are perceived to be less damaging to the credit. However both can be a painful process for the family and can take up to a year to complete.
- If you are not able to pay the mortgage premium, you can try to work with the lender to negotiate a lower monthly payment, called a loan modification. If this fails, a short sale is the best case scenario.
- You are more likely to avoid a bankruptcy with a short sale. Chapter 13 bankruptcy can be used to wipe out the junior liens. Seek good legal counsel.
- It is usually easier and quicker to recover from a short sale situation instead of a foreclosure.
- It is usually quicker to be able to qualify for a new mortgage with a short sale rather than a foreclosure.
- There is the possibility that the lender will forgive the difference between the price of the mortgage and the amount you owe. However be sure to check with a tax advisor, as the forgiven debt must be reported to the IRS.
- By the end of the process, you might not owe anything but you will no longer have your home.
Participating in a short sale can give some control in the process of losing your home. You will be finding a buyer and can negotiate terms with the bank. Although a short sale does damage your credit, by taking this approach, you can avoid the really major hit to your credit that happens with a foreclosure. By decreasing the damage to your credit score(s), you put yourself in a better position to purchase in the near future.
In the end, perhaps a short sale is your answer. The banks are finding that short sales are less expensive and more efficient for them in the long run.
Feel free to contact me for a confidential discussion regarding your specific situation and the choices you have.