There are a lot of terms that people hear when they are looking into real estate. There are many that are a bit difficult to understand. One such term is that of a short sale. What is a Short Sale? Let’s look into this term and see if we can explain things in a manner that will be far easier for people to understand.
Making things simple is that a short sale occurs when the piece of real estate sells for an amount less than the mortgage owing on it. This means that the home is sold at less value than the amount of a mortgage that is owing on it.
These are negotiated through a department of the bank that specifically deals with these types of situations. It is called a loss mitigation or a workout department. Reasons that this can happen range from the state of the real estate market itself to the actual financial status of the person wanting to purchase the home. They are all done on an individual basis and there are no guarantees that it will go through.
A short sale is quite common when a home is close to a point of foreclosure. By using the short sale a bank can recover more money that is owed. A foreclosure leaves the bank suffering a loss of substantial money. Banks do not like large monetary losses and this is why the option to allow a short sale can save them the losses that would be incurred if the foreclosure continued through.
Having a short sale is a benefit to the home owner that is in the bad predicament. They will not have the foreclosure recorded on their credit history. This is a huge thing for them as a credit history has a huge bearing on any borrowing that they may need to do in the future. Normally a short sale can happen a lot faster and less expensive than foreclosures.
Short sales do affect a credit report, but to a far less degree than a foreclosure. They remain on the credit report for a 7 year time period. There are possibilities of getting another mortgage after in shorter time than the 7 years but it will depend on the rest of the credit report and what other information is on it.
So if the rest of your credit is good there is a possibility that you may be able to secure another mortgage in a time period of about 1-3 years after the short sale. This can be a great relief for a person in such a situation to know for the future.
With short sales now explained in a bit easier to understand terminology, you may see that this could be helpful to some people. It is never easy to give something up that you have worked hard to keep, but sometimes situations are unavoidable. We are seeing it more and more these days with the economy in the state it is now.
What is a Short Sale and other short sale questions answered. Visit http://www.nphsrealestate.org/How-to-short-sale now to get inside info on all you need to know.
[tags]What is a Short Sale, Short Sale, Sale,[/tags]
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