As many Americans are losing their homes to foreclosure they turn to short sales. But, what is a short sale and how does it affect your credit. A short sale is sometimes referred to as pre-foreclosure sale. The seller arranges with Mortgage Company to sell their property that has fallen behind for a price lower than what’s owed. The lender sells the property for the amount close to or lower than the current market value and the buyer usually gets an amazing deal.
If you are a homeowner in financial trouble, rather than arranging the short sale alone, you should find a reputable real estate agent who will be able to list the property for you and file the proper paperwork with your current lender. If you are a buyer, you too should seek a real estate agent who is able to find and show you properties that are up for short sale. Either way, professional help in this matter is always a plus.
One very important thing a buyer has to remember is that short sales tend to take 6 times longer to complete. For example, a normal home buying transaction takes about a month, a short sale can last 6 months or more. Arm yourself with patience and wait as a short sale in today’s market is one of the best ways of securing a deal of your life. Buyers must also understand that a short sale property may not be in good shape as most sellers are upset with their current situation and stop taking care of their home. As a matter of fact, many sellers remove appliances, kitchen cabinets, lighting, faucets and in some instances, even flooring.
A short sale is devastating to an individual’s credit and can easily drop the credit score from 700 to 400 points, but it’s considered a lot less risky and is less damaging than a foreclosure. In addition, Fannie Mae guidelines have recently been modified to accommodate people who had to resort to a short sale. Homeowners who sold their homes by short sale can re-apply for a mortgage just within 2 years of closing.
In my opinion, a short sale is a win-win-win situation. Sellers can return to homeownership sooner, buyers get a great deal and mortgage companies gain a new, more financially stable homeowner.