People fall behind on their mortgages for many reasons. People may lose their jobs or have some kind of family emergency that leaves them unable to pay their mortgage each month.
It only takes a few missed payments for a lender to have grounds to foreclose on a home. Mortgage companies can effectively take possession of the property and force someone to leave when they fall behind on their payment arrangements. Some homeowners will negotiate a short sale as a way of avoiding foreclosure. These are some of the benefits of pursuing a short sale over a foreclosure.
The property owner controls the timeline
Provided that the lender approves the request for a short sale, the property owner will have some degree of control over when they transfer possession to the new owner, which can help them make the transition less stressful for their family.
The credit impact is lower
In a short sale scenario, the property owner will typically still owe any remaining principal balance on the property not covered by the new buyer’s offer. The record of the short sale and the ongoing debt owed by the owner will affect their credit score. However, the impact of a short sale is significantly less damaging than a foreclosure record on someone’s credit report.
It is a voluntary process
A short sale often means taking a financial loss and needing to rebuild one’s credit a bit, but the property owner effectively remains in control of the process. A foreclosure is involuntary and can therefore be very disempowering. People find it very traumatizing to lose their homes in a situation that is ultimately outside of their control.
Those who are struggling to pay their mortgage or worried about foreclosure may need to consider listing their property and negotiating a short sale with their lender. Learning more about the different ways that people address missed mortgaged payments may help those trying to limit the long-term impact of their current financial struggles.