Monday, January 30, 2012

Short Sales Explained

 Short sales are everywhere and there is still some confusion about what a short sale means. Short sales are homes that are being sold for less than what the home owner currently owes on their mortgage. They are being sold "short" of the total amount due to the bank.

For example: The Smith's owe $300,000 on their house. In the current market the most they could sell their home for is $250,000. That means in order to sell their home in a traditional way they would have to pay the bank $50,000 (in addition to the proceeds from the sale) upon selling their home in order to pay off the mortgage. The Smith's do not have $50,000 and they have to sell their home because they can no longer afford the monthly payments.

The Smith's are great candidates for a short sale. They will sell their home for $250,000 (the current market value) or less and the bank will take a payment upon the closing of the sale for $50,000 "short" of the total amount due on the mortgage.

What does this mean for you?

If you currently owe more on your home than it is worth and you have a financial hardship which makes it difficult or impossible to make your monthly mortgage payment you may qualify to short sale your home.

There are many advantages to doing a short sale over just letting your home go to foreclosure. It is better for your credit and your ability to buy another home in the future. There is also a program (HAFA) where, under certain circumstances, the federal government will pay homeowners $3,000 upon the successful close of short sale. You can read the qualifications here.

Many homeowners find themselves in this situation in the current market. Even if your home is already in foreclosure you may still be eligible for a short sale. There are some important things to keep in mind when considering a short sale. Give me a call and we can discuss all your options.

Short sales can be a great opportunity for buyers to get a great deal on home. These homes take longer to close than a traditional property and there are some substantial differences in how you make an offer on these properties. Don't let that scare you off - it is a great time to be a home buyer!

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