The increasing number of homes for sale in the market has driven down home prices dramatically. To make matters worse, the millions of foreclosed homes for sale have also depressed home values in most neighborhoods. Because of this, may homeowners find themselves with properties whose market value is less than the mortgage debt owed.
For distressed homeowners facing foreclosure, selling a home through a short sale is one of the last options that they could explore. Basically, a short sale means that you will still sell the property but based on its current market value. After, the lender will have to agree to accept the sales proceed even if it is not sufficient to cover the entire mortgage debt. In any case, the deficit will be forgiven.
In order to know if this option will work out for you, here are some of its advantages and disadvantages.
Advantages
For starters, you will certainly be able to avoid a foreclosure if the short sale pushes through. The lender, on the other hand, will no longer have to worry about legal costs that go with foreclosures. Also, they will be able to recover some of their money and no longer need to be concerned about incurring holding costs.
Disadvantages
With a short sale, you will have to accept the fact that it will damage your credit score. The transaction will be entered as ’settlement’ in your credit report. In addition, the deficit will be considered as taxable income and you will have to pay the necessary taxes. Some homeowners are able to minimize the consequences of a short sale by negotiating with the lender skillfully. If you are unable to do so, you could always ask for help from an experienced lawyer.
Once again, options such as a short sale can help you avoid a foreclosure. Before deciding on this alternative, you must weigh everything and determine if this is really the perfect solution to your mortgage problems.
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