When homeowners begin having trouble making mortgage payments, many try to deal with this issue by placing their house on the market. However, what happens if your home went down in value since you bought it, and now you owe more than you could possibly get for it?
A short sale is one of the alternatives that exist to help New York homeowners avoid drastic, credit-destroying measures such as foreclosure or bankruptcy. By agreeing to a short sale, your lender will accept the current market value and release the remaining amount of your debt.
Getting the help you need to negotiate
Lenders may not always agree to a short sale, and their terms can be difficult to understand. For this reason, homeowners may prefer to retain an attorney who can negotiate with the lender and keep them informed.
Why lenders agree to short sales
For lenders, the decision whether to allow a short sale basically amounts to evaluating whether doing so will save more money than foreclosing. Foreclosure can take some time and money to complete, and the lender has no guarantee that the house’s market value will rebound high enough to make the endeavor worthwhile. Some lenders, nevertheless, have strict policies on short sales.
Advantages for homeowners
For most homeowners, proactively negotiating a short sale presents a better option than letting the home go into foreclosure. For one thing, the further behind you fall on your payments, the more you will end up owing in interest and penalties. Another issue is the prolonged months of stress many undergo during the foreclosure process.
Your credit rating
While a short sale can affect your credit score if the lender chooses to report it, a foreclosure or a bankruptcy generally has a more devastating effect. The way your lender reports it can also make a substantial difference. You can further reduce the potential damage to your credit by beginning short sale negotiations before you miss too many payments. In fact, you may not actually need to miss payments to get a lender to allow a short sale, so you can ask your attorney to open negotiations as soon as you realize you are in danger of falling behind.