If you are having problems making your mortgage payments on time, you may be considering various solutions. The best option for you depends greatly on your individual circumstances and priorities.
For some New York homeowners, a short sale may present the best way to handle financial difficulty. As with other types of real estate transactions, negotiating a short sale can be a complex process with potential tax consequences, so qualified legal help is important to avoid potential pitfalls along the way.
What is a short sale?
Basically, a short sale can happen when a mortgage lender agrees to let you sell the house for less than the amount of the mortgage you owe and to accept that amount in full satisfaction. Doing so can become necessary if the home’s current appraised value falls below the amount you still owe (otherwise you could just sell your house normally and pay off the mortgage). You can begin negotiating a short sale before you begin missing payments.
Why would a lender agree to a short sale?
Even though accepting a lower amount in payment of your debt can seem counterintuitive for a lender, in many cases doing so can make financial sense, especially when the alternative is foreclosure. Foreclosing a property can entail costs to the lender and take a long time, during which the lender continues not to receive any payment at all. Even when the house finally goes to foreclosure auction, the lender still has no guarantee the sale price will cover the amount of the owed mortgage.
Advantages for homeowners
For homeowners, the quickness of the process also offers advantages. Foreclosure can be a drawn-out process that shows in public records. Deciding on a short sale before you miss too many payments can help you avoid stress from the lender’s attempts to collect missed payments.
Many people worry about the credit consequences of a short sale. While the lender may report the short sale to credit bureaus, generally speaking, a short sale’s effect is less than that of a foreclosure, especially if you do not miss payments.