What is a short sale?
A
short sale is a home sale where the proceeds from the sale won't cover your
obligations including mortgage payoff, closing costs and fees. A short
sale is dependent on you not having other sources of income to pay these
costs.
Is a short sale available to all
homeowners?
No. In order for a lender
to consider a short sale, generally several criteria must be established.
First, the value of your property must be lower than the mortgage you owe on
it. Second, you have a financial hardship that keeps you from being able
to afford your payments. Finally, you need to be able to sell your home
and your lender must agree to accept the lower payoff.
Is a
short sale common?
Yes. According to
recent statistics, in Michigan 37% of homeowners owe more for their property
than their home is worth on the market. Nationwide, over 5.3 million homes
have mortgages that are considerably (over 20%) higher than the value of their
home.
During the first six months of 2009, the number of short sales has
tripled to over 40,000 acrossing to a report from the Office of Thrift
Superivision (US Goverment).
Why would my lender consider allowing me to sell
my property for less than I owe?
Often, it is less expensive for a lender to take a
loss on a loan and allow the property owner to "sell short" than it is for a
lender to foreclose and re-sell the property. It is a business decision
that your lender makes to reduce their loss on a loan.
How much does a
short sale cost me?
Generally, a short sale costs the
homeowner nothing. Realtor fees and other costs are paid by your lender at
closing. Beware of companies who charge a property owner (who is already
in financial duress) additional out-of-pocket fees.
Will a short sale damage my credit?
This depends on
the lender. Most lenders do report the short sale to credit bureaus as a
serious delinquency. A short sale, however, is less damaging than a
foreclosure to your credit report.
Are there other
options?
Yes! A short sale should be your last resort prior to foreclosure.
If you desire to stay in your home there are several other options available
including home counceling and loan modification. Visit our help center for
links to these programs.