Whether or not there are benefits of doing a short sale, and what those benefits entail are influenced by a number of factors, including which party you represent, your location, details of your personal finances and individual situation.  This article will focus on aspects of doing a short sale from the Seller’s position, good bad and ugly.

Simply put, a short sale is when the home owner's lender agrees to accept less than the owed payoff on the existing first mortgage.  If there is a second mortgage, such as a home equity line of credit, the second lender must also approve any deficiency.

          In today’s market, property values are just about as low as they can be. Because of this, more and more homeowners owe more on their mortgage than what their home is actually worth.  For homeowners who have undergone a hardship – like a job loss, divorce, illness, etc., it is near impossible to stay current with their mortgage payments.

Even those with stable jobs and steady incomes are unlikely to sell their home and satisfy their full debt to their lender. That’s why short sales have become so common. For homeowners who aren’t eligible for a loan modification and need to get out from under a pricey mortgage, see doing a short sale as their best option.

The good:

-     - Doing a short sale include a lesser "credit score hit" (75 -100 points for 2 years) where a foreclosure is up to a 300 point hit for 7 years.

        - Although your credit is affected by a short sale, according to Fannie Mae guidelines, a   buyer is eligible to buy a home within two years after a short sale, instead of 5 to 7 years

-     - During the short sale process, if you are unable to make your mortgage payments, it is  not grounds for a lender to evict you UNLESS a foreclosure has already taken place.

        - You can remain in the property during the sale

     - You may be released from full liability with the loan.

     - You have time to make other living arrangements

     - You may be able to rent and even buy the property back from a third party.

     - You can avoid a foreclosure on your credit history

-       - You may be able to avoid bankruptcy

The bad and the ugly:

-There is no guarantee the bank will accept a short sale offer.

- Banks want personal financial records such, bank accounts, assets and liabilities, paystubs, tax returns and a hardship letter. They may continue to ask for updated

- Waiting for the bank to respond to an offer can be frustrating. 

     - Having prospective buyers requires keeping your home in pristine condition for the entire process until an offer is received which also dealing with the traffic in your home. 

            The last thing any distressed homeowner wants is a foreclosure. It’s a long, painful, and public process that often has significant and lasting damage to a borrower’s credit. A short sale, if a loan modification isn’t possible, is an alternative to avoiding a foreclosure before it even begins

DISCLAIMER: The information provided in this article is general information and is not intended  as legal advice. If you are a distressed homeowner with the possibility of facing a foreclosure, you should always consult a short sale experienced attorney to guide you through the process and discuss all options.