Millions of Americans are either purchasing short sales or putting their homes for sale using short sales. Even as popular as short sales have become, many don’t truly understand how they really work. We have seen a dramatic drop in property values over the last few years in response to this housing bust. In many areas values have dropped as much as 61%. This has left many home owners owing more money on their homes than their home is actually worth. To answer this epidemic problem lenders have started agreeing to “short sale” select homes.

A short sale is the process of selling a home for less than what is owed. For example a lender might agree to sell a home for its current value of $100,000, even though the consumer owes $126,000 on their loan. There is then a deficiency balance that is owed to the lender. The lender then typically agrees to forgive that deficiency balance, and the consumer can sell the home for current value and not owe the lender any more money at all.

This is where a short sale differs from a foreclosure. In a short sale the consumer is relieved from the debt they owe. With a foreclosure the debt is still owed, and the lender can pursue the consumer for tens-of-thousands of dollars for the difference between the foreclosure sales price and what was owed. Short sales do have some effect on your credit scores. Some lenders will report a short sale as a settled account instead of being paid in full as agreed. This will have an effect on the credit score. The total amount of score effect will differ based on the consumer’s actual credit profile. With a good attorney, you can negotiate a short sale with the account being reported as paid in full as agreed.

Short sales are the BEST method to get out of your home and remove the legal liability if you are upside down on equity. As a buyer, short sales offer VERY low sales prices for homes you might not have been able to afford without the discounted sales price. In many cases you can purchase a home for 50% of what it was purchased for just a few years before. Whether you are a seller or buyer, a short sale is a great option to consider.

Contact us today to learn how you can have the exceptional credit you deserve.