A short sale occurs when the amount of proceeds in a sale of property is not great enough to pay the outstanding amount of money owed on the first mortgage and any other mortgages. These lenders agree to take less than the total amount owed to them and release their lien on the property to allow the sale to proceed. When they agree to do this, they will issue a “Short Sale Approval Letter” that states the amount that they will settle for and any other terms that they may impose.
Why is a Short Sale a good option?
*A short sale will cause less of a negative impact on a borrower’s credit than the other alternatives. * A short sale may allow the seller to buy a new home again in as little as two years. * Of course, the borrower’s payment history following the short sale will make an impact in their ability to get a new loan and on the interest rate available. * A foreclosure remains on your credit report for 10 years, and you may not be able to purchase another home for 5 - 7 years. * Short Sales are not reported on a credit history. It will typically be reported as "settled", "paid as agreed," "paid as less than agreed." or something similar. * Current or future employers running a credit check will see a foreclosure, but they will not see a short sale. *Deficiency judgments may be negotiated between the homeowner and lender in a short sale, and a good negotiator is often able to negotiate NO deficiency judgment. * On the other hand, banks do not negotiate deficiency judgments after a foreclosure, and you will likely have a judgment filed.
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