What Constitutes A Short Sale
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Homeowners may face financial hardship, if refinancing turns out not to be an option for the owner, and loan modification is also out, a short sale might be an means of getting the lender's money back, and not destroying the owner's credit rating too badly.
Credit Rating
One of the primary concerns of most homeowners when facing foreclosure is their credit rating. While it is not possible to maintain a credit rating in a foreclosure, many experts believe that selling the home is the better option. Foreclosure stays on the credit rating for seven years. A lender will tend to look more favorably on one trying to pay off their bills by selling the home, for future loans.
Some Lenders Deny Short Sales
For those considering going this route, not all lenders will accept a short sale as a solution. Before proceeding with selling the house, an owner must get the permission of the lender. The primary reason for lenders not accepting this method of retrieving their money is, these homes will usually sell for less than what the loan was originally for. This means the lender will not get back the entire amount of funds they loaned to the homeowner. It may make more financial sense to a lender to go ahead and foreclose on a house, than sell it.
Home May Not Qualify
Short sales have qualifications that must be met. The house must be valued at below fail market value of the area its in. The home must have a value of less than the mortgage owing on it. There could be a prepayment penalty on any unpaid balance on the home that would disqualify the house. The mortgage must be in or almost in default status, in this case, the seller must write a letter of hardship explaining they are unable to make payments on the difference owing, and why.
Seller Must Have No Assets
An important factor to remember is, the seller must have no assets at the time of sale. The lender will likely want to see the seller's tax return and/or financial statements like pay stubs. If a seller has a savings account, owns other real estate, has any type of stocks or bonds, the lender may assume the seller has other assets. Also, possible tax consequences may affect the seller going this route, the lender could issue a 1099 for the short fall owing on the home.
Real Estate Agent
One last hurdle to this route is finding an agent willing to take on a short sale. It may be difficult for an agent to find a buyer, as many of these homes are in disrepair due to lack of funds and upkeep.
Foreclosure is a scary process for some homeowners. Putting the house on the market before a foreclosure occurs may help a seller get future loans for mortgages, and even tax forgiveness from the government.
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Author Resource:-
Kenn Fong is an writer in the real estate niche. He recommends you check out Home Building Kit and Rental Agreement at http://www.therealestatescooop.com.
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By :
Jessie Stone
Submitted
2011-06-29 18:41:46 |
Article From Article Mayhem
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