Sometimes, people fall into financial troubles and can’t afford to pay their monthly loan rates anymore. Something like this happens more often than you might think. A person can get fired unexpectedly, and lose income. Unemployment can last for a long time, in some cases even several years. This situation can hurt a family’s ability to pay back the loan a lot. When this happens, one of the options that these people have is to sell their house short.
If you are thinking about this, first you need to know what is the process of a short sale. It is a mystery to many people as they don’t feel the need to find out more about this process until they encounter severe financial difficulties. If you don’t know anything about it, don’t worry, just continue reading. It refers to selling a property for less than what the family living there owes to a bank or a mortgage lender. A short sale is an alternative to foreclosure. Many people choose it as it has less severe consequences than the second option. However, the lender also has to agree.
Short Sale and Foreclosure
Selling a property short is a better option than foreclosure both for property owners and lenders. Usually, it simply has more sense. For example, if you decide to take a loan again at some point in the future to buy a new house, you will have more options available if you short sell your house than if you choose foreclosure. Although it will have a negative impact on your credit rating, it has many benefits. You will be in control of the process of selling your house, not the lender. Something like this will help you sleep better at night because you will know who is buying your property. Additionally, you will avoid the social stigma that comes will foreclosure.
If you are considering this option, it would be a good idea to find a local short sale agent with experience in this field. Professionals will provide assistance with everything you need during the entire process and will answer all the questions that you have. It is also a better solution for the lender as they rather choose to accept less than what is owed for the loan that to take the house by foreclosure and try to sell it later. The foreclosure process can be quite lengthy and costly, and that’s why they want to avoid it.
Granting Short Sale
Banks grant short sales for two reasons. They approve it when the property owner has a hardship, and if there is enough equity in the house to pay off the loan after covering sale expenses. Some of the examples of hardship include reduced income, unemployment, bankruptcy, divorce, medical emergency, and death. You will be required to prepare and submit a financial package to the bank that includes the letter of authorization, completed financial statement, preliminary closing statement, two years of tax returns, the last two months of bank statements, and other documents. You should consult the bank and ask to provide the complete list of paperwork that you will need to submit.
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