Short sales, where owners sell their houses for less than they owe, can offer underwater borrowers an alternative to foreclosure. Equally important, they can give financially troubled homeowners a fresh start.
Critics say that selling a home for less that it is worth can come with a steep price, including a lower credit score and the loss of any built up equity. But for a growing number of homeowners, the benefits outweigh the risks, particularly when their only alternative is foreclosure.
Why should you consider a short sale? Three reasons:
1. They can get you out of debt:
“With the incentive for banks to forgive debts that remain after the sales, the typical homeowner walks away debt-free. ‘For most borrowers, it’s a good idea,’ said Todd K. Helwig, a real estate attorney with Mirick O’Connell in Massachusetts. ‘If you want to get out from under the burden of your loan, it’s usually the best way, as long as you can convince the bank to agree not to collect the remaining debt.’ (Short Sales Soar as Home Foreclosures Fall by Lawyers.com)
2. They can benefit your lender:
“[A short sale] allows the lender to avoid adding another piece of property to their foreclosed inventory (which for many lenders is overloaded already). The lender also saves time and money in avoiding the foreclosure process. Finally, in most cases, the lender can get more money from the short sale than it can at a foreclosure auction.” (Short Sale in Surprise, Arizona: When It Is the Best Option by Dan Dodds)
3. They’re getting easier:
“On April 17, the FHFA directed Fannie Mae and Freddie Mac to develop enhanced and aligned strategies to facilitate short sales, deeds-in-lieu and deeds-for-lease to help more homeowners avoid foreclosure, including requiring that servicers review and respond to short sale requests within 30 days from receipt of a short sale offer.” (Fannie and Freddie Streamline Short Sales by Orrick, Herrington & Sutcliffe LLP)
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