In this market with the change in interest rates, jobs, and opinions from everyone it is often asked why would I do a short sale or why not just walk away from the home and let the bank take it into foreclosure? Both are very valid questions and while we can't get all the reasons out there we thought it might be good if we go over a few reasons for each and why you may or may not do each one.
Short Sale
- This is the process where you actively work with the bank and a loss mitigation specialist to sell your home even though you owe more than the home is worth.
- This is a valid solution if you want to prevent a foreclosure from showing up on your credit report.
- You want to limit the number of late hits to your credit report as it can often be accomplished much faster than a foreclosure.
- You want to face the issue at hand and have a bank that understands that these things do happen.
Foreclosure
- You bank has indicated to you and your real estate professional that they have no intention of working with you on a short sale. Make sure this is in writing before proceeding.
- You may or may not have multiple properties that you cannot get short sales negotiated on.
- You are OK with significant damage to your credit and having to report that you had a foreclosure on future lending applications.
In all both are solutions that will help a homeowner when they are faced with mounting or increasing mortgage payments that cannot be met. Be very wary of individuals who guarantee they can make a short sale work or guarantee that they can prevent foreclosure unless they are personally going to buy your home and can show you proof of that in writing that they don't mind getting notarized. In the end not one single solution is best. What is best is the one that works for you and your family. Make sure that you receive appropriate advice from your real estate professional as well as your tax advisor prior to pursuing any course of action.
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