In a short sale foreclosure, the property is returned to the bank because the borrower was not able to make loan payments.
The term short sale foreclosure is also used for an arrangement in which the lender allows the borrower to sell her house for less than the owed amount. Generally, this option is available only if other attempts of preventing foreclosure have been used.
The performance of the lender determines the amount of money it receives from the Federal Treasury. If the customers of the bank are not making their payments, the Fed can decrease limits or put a stop to lending altogether.
The law does not allow banks to hold more than a certain number of foreclosed properties. With short sales, the banks get a chance of liquidating their real estate inventory.
Making a short sale can be a saving grace for a borrower who is not able to refinance or get a loan modification. Usually, the process takes four to six months to complete; however, it enables the debtor to settle without making any additional payments.
There is however an exception. This is when the financer issues a deficiency judgment. Some lenders consider the difference between sale price and loan balance to be the borrowers responsibility. In the case of two or more mortgages, this amount can be considerable.
Deficiency judgments have multiple financial consequences. Your credit record continues to be affected by this until you pay off the debt. You may also have to make phone calls for months if the court fails to report the judgment paid.
Due to deficiency judgments, you may not be able to obtain any type of credit for many years. You will basically have very little chance of getting another mortgage loan until you get rid of the judgment. It has a negative effect on credit worthiness at all levels. It may take you a lifetime to recover from the financial fallout.
As a borrower, you should be negotiating for a full payment without the possibility of a deficiency judgment. This agreement will mean that the bank considers the sale price as the full payment and will not pursue you for the difference.
A short sale will affect your credit score; however, it won't be as damaging as foreclosure or bankruptcy. A short sale will remain on your credit record for 7 years, while a bankruptcy will remain for 10 years. If you are able to eliminate your financial issues, you can try to get another mortgage loan within 2 years.
A lender will handle short sales in accordance with its established corporate policy. However, a borrower can expect to show tons of financial documents for proving financial insolvency. After all, if the lender is willing to accept loss on the home, it wants evidence that you don't have any assets which could be utilized for satisfying the debt.
Majority of lenders will need you to get a qualified buyer lined up before discussing short selling. Others will provide you the opportunity to list your home through a realtor. Usually, the mortgage lender provides 2 to 3 months to the borrower for this purpose. Otherwise, the bank will start the foreclosure process.
One way of finding a buyer for a short sale foreclosure is to seek out investment groups or private investors. This type of property is of interest to investors because it is available for a price that is lower than the market value. Selling to a realty investor eliminates the realtor from the equation and improves your chances of getting approved for a short sale.
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Orignal From: How Shorts Sales And Foreclosures Affect Sellers
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