Sleepless nights, headaches, frustration, and fear are all a part of the experience if you’re facing foreclosure. Financial distress can cloud your thinking and make you feel frozen and helpless. Job loss, illness, an accident, and many other factors can result in the loss of your home. Now is the time to come out of that trance and take action! There are alternatives to foreclosure, a short sale is often a good option. Let me help.
In a nutshell, a short sale is a legal arrangement with a mortgage lender to sell a property for less than is owed. If you are behind on mortgage payments and do not expect to catch up, it might be time to consider a short sale.
If you paid for your home with a loan, you made a binding agreement with your mortgage lender. You promised to pay back the money you borrowed in a way determined at signing. If you don’t pay as agreed, the lender has the legal right to sell the property and recover as much as possible.
Mortgage lenders can (but are not required to) remove the lien on your property to sell it. When this occurs, the homeowner usually stops making mortgage payments. This might be an opportunity to stay in the home throughout the selling process without paying so you can get back on your feet financially.
Will a short sale protect my credit?
It is a common misnomer that a short sale is better for your credit than a foreclosure. According to an online article by Equifax, “How a Short Sale or Foreclosure May Affect Your Credit Scores,” there is no difference between the impact of a short sale and a foreclosure. It will likely appear on your credit report as “not paid as agreed.” Both will stay on your credit for seven years.
Here’s how a short sale works:
- The homeowner secures a formal written agreement with the bank to sell the home for less than is owed.
- The home is listed for sale.
- The bank must approve the price as a third party.
- When the home sells, the proceeds go to the bank.
If your home sells for less than you owe, there will be a “deficiency.” The deficiency is the difference between what you owe, and what the new owner paid. Utah lenders can get a deficiency judgment after a nonjudicial foreclosure. The bank can file a lawsuit within three months of the sale. A mortgage lender can forgive the deficiency too. Speak to a tax advisor about any potential tax implications of a short sale in your situation.
Is a short sale a good route to take?
Personal financial pressures and lagging real estate markets can lead to the need for a short sale or a foreclosure. A short sale can benefit the seller, the buyer, and the lender. Northern Utah spent 2024 in a strong sellers’ market. Short sales decrease in a sellers’ market because home values and demand increase.
Seller:
The seller is relieved of brutal financial pressure by working closely with the lender.
Buyer:
The buyer can get a great deal on a home.
Lender:
The lender avoids the expense of foreclosure proceedings and can recoup most, if not all, of its mortgage investment.
Do you still have questions about short sales? Give me a call, I will be happy to answer them. Call or text 801-673-3333.
