In the most basic definition, a short sale is the process of selling a primary residence for less than what is owed with the approval from the current loan company.
In other words, if you must sell your home that you owe $500,000 on but the home is only worth $400,000 – the bank may approve a “short sale” and allow you to sell the home for a lower amount. However, this article is going to go into a lot more depth than just the basic definition. Below, you’ll learn (click to jump to the section:)
- Short Sale Basics
- Short Sale Eligibility
- Alternatives to a Short Sale
- The Short Sale Process
- Short Sale Pros and Cons
- Tax Consequences of a Short Sale
Short Sale Basics
How long does a Short Sale take?
The length of time a short sale can take greatly depends on a number of factors, especially who the lender is. Some lenders can approve a short sale in as little as two weeks, where other lenders can take a year or longer. However, most short sales can be completed in a three to five month time period.
Why do people sell with a Short Sale?
If a home is currently “underwater,” which means the owner owes more than the property is worth, a property cannot be sold on the open market without the homeowner having to pay the difference. If the new purchase price can’t pay off the old loans and the homeowner can’t come up with the shortfall – everyone is stuck. This is when a short sale comes into play.
Why Would a Bank Agree to a Short Sale?
Typically, a homeowner will choose to sell their home via a short sale in order to avoid a foreclosure. If the foreclosure is completed, it allows the lender or a cash …read more