A short sale is a way to avoid foreclosure that involves selling a home on the open market for a lower price than what the home was originally purchased for. Following the sale of the home the remaining balance on the mortgage will be forgiven by the lender. It is a way for a homeowner to escape an underwater home without having to pay the deficit on the mortgage following the sale of the property.
A short sale is instigated by the homeowner with the help of a real estate agent and a short sale attorney. The lender must approve any short sale since they are accepting a sum of money that is less than what was agreed upon in the promissory note of the mortgage. By agreeing to accept a short sale at the offered price, the lender agrees to accept that payment as satisfaction of the mortgage agreement and dismiss the remaining balance of the mortgage from the homeowner’s responsibility.
For the homeowner this means that they can walk away from a home that decreased in value without any further payment obligations, even if they still owed the bank tens or hundreds of thousands of dollars on the mortgage.
There are benefits of a short sale to both the borrower and the lender. The main benefit for both parties is that a short sale will avoid the entire judicial foreclosure process, and can be completed in a much shorter time and at a smaller cost, than a foreclosure.
The biggest benefit to the homeowner is that they are able to walk away from a home that they are underwater on without having to make anymore payments on the mortgage or any future payments from a deficiency judgment. A short sale also impacts their credit score much less than going through foreclosure does, so they are in better shape financially following the short sale than with the foreclosure. For anyone that can no longer afford to pay their mortgage, a short sale is a way to get out of their mortgage obligation without being sued.
The benefit of a short sale for the lender is that they are able to recuperate a larger portion of the mortgage amount through the sale of the home. In a foreclosure it is common for the house to deteriorate and be vandalized during the lengthy process, which will decrease the value of the home. A short sale minimizes the amount of time that a house will be unoccupied and homeowners performing a short sale will take care of their home in an attempt to generate the best offer in a short amount of time, making it easier to sell. The lender also has to absorb the cost of lawyers and court time that are required in a foreclosure.
The short sale process is an alternative to foreclosure than can benefit both the borrower and the lender, but can be a complicated and difficult process. It is a good idea to work with a Florida Short Sale realtor to ensure the process is completed correctly and efficiently. Contact Advantage One Florida to schedule a free consultation today! (904) 527-5205