In today’s unsettling economy, many people are facing the very real possibility of losing their homes. Mortgage lenders entered into a greed-driven housing market creating mortgages with many different requirements and payment options. In addition to creating different payment options, lenders became increasingly less stringent on application requirements to obtain these mortgages. This led to the collapse of the housing market that we are experiencing today.
Homeowners are experiencing record job layoffs and financial hardships. They are finding it difficult if not impossible to make their payments. Some homeowners are also facing payments that are increasing and sometimes doubling due to a variable rate. These homeowners, because of the housing collapse, do not have the option of selling their home in today’s market to salvage their credit because many times the home no longer has the market value needed to fulfill their mortgage obligations.
What does that mean exactly? If the home was purchased for $150,000.00 it is most likely only worth $120,000.00 today. Selling the home would not provide them with enough cash to pay off the mortgage and all of the related realtor fees, not to mention giving them some money back to put down on a new home. A short sale can be the answer for many of these homeowners but because it is difficult to find information on this process, many homeowners do not know about short sales.
A short sale is an agreement by the lender to accept less than what is due on the mortgage. A homeowner could sell for market value and satisfy what is due, under this short sale agreement. The realtor fees are essentially paid by the lender because they are taken out of the purchase price and the homeowner avoids a very damaging foreclosure on their credit report. The time frames for short sales vary from state to state depending on if the state is a judicial foreclosure state or not. The judicial process takes much longer, sometimes as much as 18 – 24 months, than the non-judicial states.
Short sales are now, because of the housing market, a tool used by realtors to keep selling properties. There are educated realtors that can facilitate the entire process of the short sale for the homeowner. It is a creative tool, if used correctly, for the realtor to sell a house below market value thus creating instant equity for the new buyer. These are great options for first time home buyers. The interest and use of short sales has increased so much that most lenders have fully staffed “short sale” departments.