Bank Short Sale
Are you behind on your mortgage, owe more than your home is worth, or at risk of foreclosure? A bank short sale may just be the solution for you. It helps you avoid the difficulties of foreclosure while relieving yourself of loan obligations, allowing you to start over faster. If other solutions are out of the question and you’re not that keen on keeping your home, a bank short sale should definitely be on your list.
What it is
The simplest bank short sale definition is an arrangement wherein the lender allows a borrower to sell his home at a discount and accepts the proceeds as payment for the loan. Basically, the bank agrees to accept less than what the homeowner owes and forgives the rest of the balance, allowing them to walk away with a clear account.
The bank short sale process best suits people who have negative equity, or those whose debt on the home is larger than the home’s value. This is because even if the bank goes ahead and forecloses, there isn’t enough value in the property to cover the loss. With a short sale, the losses are minimized both for the lender and the borrower.
Previously, banks only granted short sales to people who were seriously in default. New government rules have changed that, however—today, you can get a bank short sale even if you’re still current. As soon as you run into trouble, you can start the bank short sale process before there’s any significant damage to your record.
Why it’s Better than Foreclosure
Borrowers often ask what the point of a short sale is, as they still end up losing their homes. The difference is that with a short sale, you get to sell the home the conventional way instead of going through an auction, and you remain in control of the sale. The process is much smoother and less stressful than the typical foreclosure proceeding.
The reason most people choose short sales, however, is that they don’t reflect as badly on one’s credit report. While a foreclosure can cause a drop of up to 400 points, a bank short sale reduces it by about 200 to 300 on average. Also, a bank short sale remains on record for only about five years, whereas a foreclosure takes twice as long.
When to Apply
As mentioned above, you don’t have to wait until you’re seriously delinquent to apply for a bank short sale. In fact, the earlier you start the bank short sale process, the better the deal you’re likely to get. Call your lender as soon as you start having trouble keeping up. You may also want to consider working with a bank short sale company who can help you prepare your application, negotiate with your lender, and ensure results that make sense both to you and your bank.