SHORT SELLING A HOUSE LEADS PEOPLE AWAY FROM FORECLOSURE
Before a house goes into foreclosure, homeowners have the option of agreeing to a short sale. This generally happens when a house is in the pre-foreclosure stage. At this stage, the lender has not taken the final steps to begin foreclosing on the property. The homeowner may wish to avoid foreclosure proceedings, because the foreclosure will damage their credit for a long time. They can avoid a foreclosure by short selling.
A short sale is when homeowners sell a house for less than the mortgage is worth. For example, the mortgage is may be $150,000. The homeowners are currently having difficulties selling the house because housing prices have dropped so much recently that they can’t sell the house to cover what is owed on the loan. The homeowners may only manage to sell the house for $130,000. If the lender agrees to take the $20,000 loss, the homeowners can proceed with the short sale.
In order to qualify for a short sale, four requirements must be present. If the house is located in an area where housing prices have dropped significantly and the value is less than the current mortgage, the first qualification has been met. If the homeowners are very close to defaulting on the loan and are currently experiencing financial difficulties that will make it impossible for them to pay their monthly mortgages, they have met the second and third qualifications.
The last prerequisite is that the homeowners have no assets with which to pay the difference between what the house will sell for and the amount of the mortgage. These homeowners must be able to prove that they are in no position to pay the remaining amount or else the lender may not allow the short sale.
After the lender has agreed to take less than is owed, the homeowner can list the house for sale as a short sale with a real estate agent. A potential buyer will make an offer that will be lower than the amount owed on the mortgage. Both the homeowner and the lender will have to agree before the offer can be accepted. If the offer is agreed to by both parties, the sale goes through and the homeowner avoids foreclosure.
Short selling a house can keep people from having to declare bankruptcy and have foreclosure proceedings started against them. They relieve themselves of monthly payments they can no longer afford and they can begin to start their lives anew.