If you can no longer make your mortgage payments and your home is now worth less than you owe on it, foreclosure may not be your only option.
A short sale, is the process of selling a house for less than what the borrower (owner) still owes on the mortgage. If the lender agrees to a short sale, the rest of the homeowner’s debt typically is forgiven. Lenders often agree to these sales in order to take a small loss and avoid the lengthy and costly foreclosure process.
Short sale: Win-win-win situation
The beauty of short sales is that they can be a win-win-win situation for seller, buyer and lender. Here’s how:
- The homeowner (borrower) can alleviate their mortgage liability without facing bankruptcy.
- The buyer gets the home at a reduced price.
- The lender agrees to a loss it considers minimal without going through a foreclosure and being saddled with an unsalable property.
While it may seem surprising that lenders would agree to accept less than what they are owed, they benefit from the process, too.