Delinquent homeowners who want to protect their credit score, just a little bit, can turn to short sale as a viable process that will protect them from the long lasting effect foreclosure would have on their credit score. When a delinquent homeowner is put through the foreclosure process, the person’s credit score is pulled a couple of points below the acceptable limit.
As an alternative to foreclosure, the short sale process allows the delinquent homeowner to sell off the house to a potential buyer. The money received from the buyer is then used by the seller to settle the loan.
In all these, the mortgage lender’s decision on the short sale process is very important. If the lender thinks that the deal the buyer and the seller have arrived at does not favor its interest, the lender will reject the short sale offer.
However, even if the lender agrees to the homeowner’s decision to short sell the house, the delinquent homeowner will still feel the negative impact of a foreclosure alternative on his or her credit score. The difference here is that, short sale does not stay as long as foreclosure would, on a person’s credit score. By using short sale as an alternative to foreclosure, delinquent homeowners can solve their mortgage problems and within a short time begin to improve upon their credit score.
It is better to utilize any of the foreclosure alternative programs than to allow the mortgage lender to foreclose your home. However, there are certain things that will make it impossible for a delinquent homeowner to take advantage of short sale.
In most cases, when a distressed homeowner decides to make use of short sale, the mortgage lender is bound to lose some amount of money. This is so because, short sale property are at all times sold for an amount lower than what is yet to be paid on the mortgage loan.
Homeowners who do not work diligently to put everything in order would have their lenders denying them the opportunity to use this all important foreclosure alternative program. For example, a distressed homeowner who does not assess the issue of pricing very well will not be able to find the right price for his or her home. This has the tendency to either drive buyers away or cause the lender to reject the process.
Mortgage lenders are very much aware of the fact that when they accept short sale, they are most likely agreeing to accept a lower amount than what the homeowner owes them. Nevertheless, they would want to accept an amount that is almost close to what the borrower owes so as to limit their losses. This pushes the borrower to price the home at an amount that will gain the approval of the lender but will cause buyers to back down. On the other hand, a low price tag will cause the lender to reject the offer although it would attract a lot of potential buyers.
Another factor that can destroy a borrower’s intention to short sell his or her property has to do with whether or not the homeowner pays Homeowners’ Association Dues. Homeowners who have several months of default to their names will have the association foreclosing on their homes. Not very many people know that the association can foreclose homes.
Those who do, turn to think that since they can stop mortgage payment once they are in the process of completing a short sale deal, they can do same with the homeowners’ association dues. For a successful short sale process, the homeowner must continue to pay his or her dues.
The short sale process can be complicated and stressful because the seller would have to deal with a large number of; potential buyers, phone calls and paperwork. The success of the program can be guaranteed if the homeowner employs the services of a reputable agent who has worked with the short sale process before. The seller must frequently update the lender on how far the process has gone so that if there is the need for the bank to object to something, it would be done early and corrected.