Pros and Cons of Short Sales
By Brenner Spiller & Archer, LLP | April 24, 2017
Each year, millions of Americans find themselves in situations that make it difficult for them to keep up with their mortgage. Financial issues stemming from a sudden death of a loved one, prolonged unemployment, and other issues can leave a homeowner overwhelmed without many options. This is around the time when homeowners start considering a short sale.
A short sale allows a homeowner to sell their home for less than they owe on their overall mortgage. If approved, a homeowner can reduce their financial burden by getting rid of the home. While a short sale can be a great solution for most people, it should be noted that it’s not always the right solution for everyone.
- Avoid a Foreclosure
Depending on the circumstances, people who consider a short sale do so with the interest of avoiding a foreclosure. If the seller has assessed the situation and come to the conclusion that they simply won’t be able to keep up with the payments, a short sale would definitely be an advantage.
- Less Credit Impact
A person’s credit can be strongly affected by a foreclosure. It’s a mark of unpaid debt that could remain on your credit report for well over 7 years. With a short sale, your credit may still be affected, but it may not be as harmful as a foreclosure.
- Selling Could Be Easier
Depending on location and various real estate factors, short sales are often in a league of their own. By undercutting other homes in the area and simply offering the home at a lower price, short sales often sell quickly, barring any bank delays. In fact, short sales are often a dedicated target for investors, house “flippers”, and first-time homebuyers.
- You’re Not In Full Control
When a house is listed for sale in the traditional way, everything from the price to the offers is on your terms. But when the house is being sold in a short sale, the bank is directly involved. The bank ultimately decides if a short sale is valid depending on the offers received; they even have power of negotiation.
- Your Credit May Be Affected
Perhaps not as badly as a foreclosure, however, a short sale is still classified as a debt that wasn’t completely paid.
- It Can Take a While
Though the popularity of short sales as a bargain has increased in recent years, how quickly your home sells in a short sale largely depends on factors outside of your control. There’s the criteria of your location, rates on the market, the value of the home – all this and the skepticism of some buyers willingness to buy the property. Some buyers will try to lower the price to unreasonable lows that can delay and distract the selling process.
If you someone you know is facing foreclosure but are looking for an alternative, a short sale may be one of the best ways for you to avoid both bankruptcy and foreclosure. Contact us today for more information and to schedule your consultation.