There comes a time when some homeowners may find themselves in a difficult situation financially. This could happen for a variety of reasons. Maybe they’ve lost their job or part of their income. Perhaps they’ve incurred some major unexpected expense such as medical debt. There’s also the potential that the housing market experiences some type of downturn like it did from 2007 to 2009.
In all these scenarios, a homeowner may have trouble paying their mortgage and, thus, find themselves in a situation colloquially known as being “underwater.” This means, their outstanding mortgage debt is greater than the value of their home. In this case, the homeowner may consider a “short sale.” But what is that?
The Basics of a Short Sale
A short sale takes place when a mortgage lender agrees to allow a homeowner to sell their home for a sum that is less than what they owe on their mortgage. Typically, this occurs when the homeowner can no longer afford their mortgage.
For example, let’s say you owe $550,000 on your mortgage and you’re unable to make the monthly payments. However, you can only sell you home for $500,000. Your choices are to wait to be foreclosed upon or to seek a short sale. If the lender approves, the $500,000 will go directly to them. They will then have the choice to either forgive the remaining $50,000 or to seek a deficiency judgement to force you to pay the outstanding debt. In New York State, the lender has 90 days to make this decision.
Who Does it Benefit?
In a sense, a short sale will benefit everyone involved. Of course, never having to consider such a sale is the best-case scenario. But if difficult circumstances arise, a short sale is generally a better outcome than a foreclosure. It allows the seller to move on and unburden themselves from debt, especially if the remaining amount is forgiven. It allows the lender to recoup most or all its money without having to go through a lengthy foreclose process. And the buyer gets to move into a new home at a reasonable price.
If you find yourself in need of short sale quickly for your Long Island home, DealHouse can help you. We’ll look at your property, make a cash offer within 24 hours and can close the deal within one to three weeks after your bank approves the short sale. Call us today at 631-388-6640 for more information or to get the process started.