What is a short sale?
When a homeowner is no longer able to pay the mortgage payments, the property can be sold as a short sale if the lender agrees to it. As a consequence, the property will be sold for less money than the total amount due. This means it is sold for less money than the homeowner owes the lender, which is why it requires lender’s approval.
But not all lenders agree to a short sale, especially if a foreclosure would be financially more beneficial to 
the lender (it is rarely the case though). Also not all sellers and all properties qualify for a short sale.
If you are considering selling or buying a short sale, there could be drawbacks. For your protection obtain legal advice from a competent real estate lawyer and call an accountant to discuss short sale tax ramifications.
A real estate agent experienced in short sale negotiations can help you navigate through those unknown territories.
What is a foreclosure?
A lender forecloses on a property when a homeowner cannot keep up the mortgage payments. It is different than a short sale, as the lender is repossessing the property. The owner not only loses his home but is also at risk of having a judgment filed against him by the lender, who wants to recover all costs associated with the foreclosure action.
Which is the better option?
Of those options, a foreclosure is the worst one, and you want to avoid it at all costs whenever possible, as it will affect your credit report for years. This makes it really difficult for the homeowner to obtain any kind of credit in the future.
A short sale can have a negative effect on the credit report as well. While the short sale process is not easy and does require the lender’s approval, it should be considered before getting into a foreclosure. When a homeowner is behind on his mortgage payments, a short sale should come into place as soon as possible. General guidelines would suggest that the more a homeowner is late in paying back the arrears, the more a lender is willing to agree to a short sale.
All in all, for homeowners who can no longer afford to pay their mortgage, a short sale is a better alternative than bankruptcy or foreclosure.
Don’t do a short sale yourself
When selling a short sale it is important to work with someone who knows how to deal with such a transaction. Wasting too much time and taking a wrong step could cause a homeowner to lose his home.
You should hire a real estate professional who is experienced in short sale listings and negotiations. Moreover, the payment of the commission is to be approved by the bank as part of the short sale process and is not typically an “out-of-pocket” expense for the seller.
Need more information? Then talk to a AMSI Real Estate Expert @ 415.447.2010
or visit our website at http://www.amsires.com/real_estate_sales.php
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