When you are delinquent on your mortgage your lender may initiate foreclosure proceedings. Facing foreclosure is highly distressing for homeowners in the Detroit area. Lenders in Michigan are required to discuss loss mitigation options with you. One of these options may be a short sale.
Short sales when you are “underwater”
A short sale allows you to sell your home for less than what you still owe on your mortgage. Your lender may recognize that they will not receive the full amount of what they are due and may agree to a short sale as it will allow them to recoup at least some of what they are owed. Short sales are often an option when a homeowner is “underwater.”
Benefits of a short sale
Homeowners benefit from a short sale in a variety of ways. Your credit score will take a major hit if your home is foreclosed upon. A short sale helps you protect your credit score. If your credit score is high enough you are more likely to be able to purchase another home in the future. Short sales also help you avoid the disaster foreclosure can bring, allowing you to move into the future on solid financial footing. Finally, in a traditional sale you must pay certain fees and charges. In a short sale your lenders pay those fees and charges.
Drawbacks of a short sale
There are some drawbacks to a short sale. In a short sale you do not see any profit from the sale of your home. Those funds go entirely to your lender. This means you do not receive the funds you may need to buy a new home. Also, your lender must agree to a short sale — you cannot simply initiate one on your own.
Is a short sale right for you?
Ultimately, only you can decide whether a short sale is right for you. While you do not see a profit and must obtain lender approval, a short sale protects your credit from the damage a foreclosure will cause. It is a mitigation factor worth considering, so you can move forward into a brighter financial future.