Can a short sale help deal with a looming foreclosure?

On Behalf of | Mar 17, 2020 | Firm News |

It can be frustrating facing a foreclosure. You may lose your home and suffer a huge blow to your credit if the foreclosure goes through. It is far better to find an alternative that will allow you to avoid the process completely.

HGTV explains that a short sale might be the answer you seek. A short sale is when you sell your home for less than you owe on your mortgage. Because the lender will not get the full amount of the mortgage owed and it will also lose the collateral when you sell the home, every short sale requires the approval of the lender.

Lender approval

You will need to find a buyer and create a sales contract with that buyer to present to your lender. The lender then will have to approve the contract. This can be a slow process. That is why when you list your home, you should inform buyers that it is a short sale. Lenders often move slow, so it can greatly increase the time it takes to sell your home. Sometimes, a lender is very difficult about approving a short sale, so you can expect that it will increase negotiations during the sales process as well.

How it helps

A short sale still will have a small negative impact on your credit. However, it is not as devastating as a foreclosure. It will show that you at least tried to react when you realized that you were unable to make your loan payments instead of letting it go into foreclosure. The negative mark will come from the fact that the sale will not repay your lender in full.