It’s likely you’ve heard the term “short sale” thrown around quite a bit. But what, exactly, is a short sale?
A short sale is when a bank agrees to accept less than the total amount owed on a mortgage to avoid having to foreclose on the property. This is not a new practice; banks have been doing short sales for years. Only recently, due to the current state of the housing market and economy, has this process become a part of the public consciousness.
To be eligible for a short sale you first have to qualify!
To qualify for a short sale:
- Your house must be worth less than you owe on it.
- You must be able to prove that you are the victim of a true financial hardship, such as a decrease in wages, job loss, or medical condition that has altered your ability to make the same income as when the loan was originated. Divorce, estate situations, etc… also qualify.
Now that you have a basic understanding of what a short sale is, there are some huge misconceptions when it comes to a short sale vs. a foreclosure. Now let’s take a look at the most common myths surrounding both short sales and foreclosures and LET’S BUST SOME MYTHS!!
Myth #1: There are no options to avoid foreclosure. Please know that now, more than ever, there are options to avoid foreclosure!
Besides a short sale, loan modifications along with deed in lieu are also examples of the many options. In most cases (but not all) a short sale is the best option. Either way, there are more options today than there have ever been to avoid foreclosure.
Myth #2: Banks do not want to participate in a short sale, or, it is too hard to qualify for a short sale.
Banks would rather perform a short sale than a foreclosure any day! A foreclosure takes a long time and creates a huge expense for the banks; a short sale saves both time and money. Banks have more foreclosure inventory than ever before, and certainly do not want any more.
Banks more than ever welcome short sales. Qualifying for a short sale is easier than you think, you need to have a true financial hardship, or a change in your finances and your house has to be worth less than what you owe on it. Not only do consumers, but banks now also have government incentives to participate in short sales.
… and there are more ‘myths’! Watch for my next post to see more Short Sale-Foreclosure Myth Busters!