SHORT SELLING Can Save Your Credit
July 28th, 2010
Short selling involves the selling of a property that the home owner can not afford or does not want to pay for any more. Short selling refers to the sale of a home in which the lender allows the home owner to sell the home for less than the pay off amount on the mortgage. Lenders will often times approve of this type of transaction because they do not prefer to take possession of your home in foreclosure. Contrary to popular belief, the bank does not want to take possession of your home.
Lenders in Tempe, AZ understand the value of a home owner short selling the home because they understand the high number of home owners that are struggling to make mortgage payments. Because of this high number, banks and lenders could find themselves having to foreclose on dozens of property if they don't allow short selling.
By law, a lender in Tempe, Arizona can only have a certain number of foreclosed properties. With record numbers of home owners defaulting, lenders must be cognizant of this. So, short selling gives the bank an opportunity to keep themselves from taking on to many foreclosures.
Short selling a property can save the property owner from having to deal with foreclosure or any other option to defaulting on their loan. The process of short selling generally takes about four to six months to complete. Short selling also allows the home owner to walk away from their mortgage without owing any additional moneys.
However, there are exceptions to this rule. The lender can issue a letter that requires you to pay off the difference between the sale price of the home in a short selling process and the mortgage pay off amount. This amount can be a difficult amount to pay off in some cases.
When you utilize the short selling process, there are many ways that it can affect your credit. If your lender allows the short selling of your home to be used as payment in full, your credit will barely take a hit and you may even be able to purchase a new home in as few as a dozen months to two years. However, if the lender requires that you pay the difference and, in turn, you can not make up the difference, your credit can be hit hard by this. Taking out another loan to pay off the difference in your short selling process may not even be an option for you as your credit and financial means could be limited.
So, with this in mind, home owners using the short selling process should be sure that they negotiate for a judgement of "Payment in Full" from their lender. Without that judgement, it could take you as long as ten years to restore your credit.
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Fred Weaver is a founding co-owner of Group 46:10. He has been working in the financing/real estate business for over 7 years. Fred began his real estate career by working for a large wholesale bank as a processor and rate/lock specialist for home mortgages. After 2 years in the business, Fred transferred from the banking side of home loans to the mortgage side. While on the mortgage side of financing, Fred gained experience originating mortgages and processing files for Morgan Capital of Arizona, Inc.
Kevin is a founding co-owner of Group 46:10. He began working in the real estate business in 2007 after spending 8 years working in the finance industry for companies such as Bank One, Green Tree Financial, & GE Capital.