Currently, many homeowners are looking for a way out of dealing with underwater or upside down mortgages. Since home values have dipped so drastically in the past few years, many sellers do not have the equity in a piece of property to afford to sell the home at market value. Others simply face financial difficulties and cannot afford to keep paying the mortgage, leading them to look for another option rather than foreclosure.
Short sale transactions can provide an excellent alternative to foreclosure to many homeowners. However, this option is not the best choice for everyone. Any homeowner should take the time to consider both the pros and cons of this process before making the choice to go this route. The following is a look at both the pros and cons of a short sale, which can help homeowners decide if a shortsale is the best choice for their particular needs.
The Pros of Short Sales for Homeowners
A short sale can bring certain benefits. The following are a few of the pros that homeowners can enjoy when deciding to go through the short sale process.
Pro #1: Less of an Impact on the Homeowner’s Credit
One of the pros shortsales have to offer homeowners is that they have less of an impact on the homeowner’s credit score and credit report. While this transaction will definitely have a negative influence a seller’s credit, it is a slightly less damaging than going through a foreclosure. In most cases, these transactions are reported as “settled debt” and this reporting has a less severe impact than a foreclosure would.
Pro #2: Purchase a New Home Faster
Another pro that makes a short sale a good choice for homeowners is the benefit of being able to purchase a new home faster when choosing this route. Fannie Mae guidelines allow individuals to purchase another home in just two years. In some circumstances, if there are no late payments more than 30 days late, consumers may be eligible to purchase a home right away, although it may not be easy to actually do so.
Pro #3: Enjoy Faster Credit Recovery
Although a homeowner’s credit will no doubt be negatively affected by a short sale, most consumers will find that they can enjoy faster credit recovery when choosing this route over foreclosure. Short sales do not affect an individual’s credit for as long as a foreclosure can, making it possible for homeowners to get their credit score up faster. For consumers that want to purchase a home in the future, this is especially important, since lending criteria are so strict today.
Pro #4: May Not Owe Anymore
In many cases, homeowners enjoy the benefit of not owing any more money after the short sale is complete. Sellers have the option to ask the bank to cancel the rest of the debt that remains unpaid after the sale takes place. While this does not happen all the time, it does happen in many cases and can be a huge relief to sellers that are under a huge financial burden.
Pro #5: Avoid the Frustration of Foreclosure
Last, the short sale option makes a good choice for many homeowners because it allows them to avoid all the frustration of going through a foreclosure. Going through a foreclosure can be stressful and difficult, especially since it can take six to twelve months for the entire process to be completed. Although a shortsale can be a lengthen process in some cases, it is often less frustrating than going through a foreclosure, especially for families.