Sometimes disasters happen such as a lost job or an unexpected debt that prevents a home owner from making a mortgage payment. In such an event, short sales are often one of the last desperate efforts made by home owners in order to avoid foreclosure. The home owner sells his house to a prospective buyer and gets the lender to approve this sale.
Freedom From Mortgage Payments
With short sales, the home owner comes up with the difference of the amount owed to the house. The amount that the homeowner has to pay off is negotiated down by the real estate short seller. The house is then sold to a buyer, freeing the previous home owner from mortgage payments. However, the home owner is often bankrupt as a result and has to search for a place to live.
Less Damage to Credit Score
Short selling is an option for lenders when mortgage holders do not have the money to pay for an increase in a mortgage and do not qualify for a refinance loan. Short sales are sometimes done when the cost of the mortgage exceeds the price of the home. Short sales are also done to avoid the credit damage caused by a foreclosure, though short selling will also cause extensive damage to the credit score. In order to short sale, the home owner must be at least one month behind on his mortgage payment, must have a willing buyer and must have tried other debt services.
Alternative to Foreclosure
Short sales are an alternative to foreclosure for lending institutions like banks. With foreclosure, the bank takes over the house and has the home owners evicted by a marshal if the home owners do not leave themselves.
Sale Mitigation Specialists
The home owner should be careful with some short sale mitigation specialists that charge an upfront fee, since they will not always successfully sell the home. The bank will sometimes not approve of a sale that the loss mitigation specialist arranges, leading to a loss in the upfront payment. Home owners should not confuse loss mitigation specialists with the loss mitigation department of a bank, which is a department focused on minimizing the financial loss that the lender experiences.
Short Sale Argument
The short sale process begins with the house being listed on the market by a realtor in order to ensure that the property is properly marketed. Tax returns, pay stubs, bank account statements, mortgage payment coupons, deeds and the original copy of the mortgage note must be assembled into a package in order to make an argument that a short sale is needed.