Short Sales: A Way to Avoid Repossessed Home
Short sale and foreclosure are very different from each other. This is what Lincoln Calder, president of Park City Board of Realtors in Utah, wants homeowners to know. He is concerned about some of the misunderstandings surrounding short sales.
He claimed that the term is not synonymous to foreclosure and one is very different from the other. He believes that better understanding of the concept and term will help distressed homeowners avoid repossessed home.
Also, understanding the concept of short sale can help buyers find and choose better deals in the current housing market.
Treasury Secretary Tim Geithner recently unveiled plans of the U.S. government to promote short sale as a way to control the flood of repossessed home that is pulling down home prices and causing devastation on the housing market.
Short sale is a transaction in which lenders allow homeowners to sell their distressed properties at less than their total mortgage. The federal government will encourage lenders to accept short sales by providing incentives for them.
Board of Realtors President-elect Mark Seltenrich explained that the term comes from the understanding that a homeowner is short in paying his mortgage. He added that with short sale, both the lender and the homeowner benefit from the transaction.
Lenders want to avoid foreclosures because they are time consuming and expensive. Meanwhile, a homeowner’s credit will be totally ruined in foreclosure, but not so in short sale, according to Seltenrich.
He added that is there is no standard way on how banks will report a short sale to credit agencies. Therefore, it is difficult to determine the real impact of short sale, but it will be better than dealing with a repossessed home, Seltenrich pointed out.
On the other hand, Calder admitted that short sale is a good alternative to foreclosure but what hampers the transaction is the difficulty of the process. He pointed out that many realtors find foreclosure easier than short sale.
He explained that a short sale is for delinquent homeowners whose mortgages are more than the value of their houses. He added that it is important that homeowners understand how they can qualify for the transaction.
He suggested that homeowners who are considering short sales to avoid repossessed home should hire a real estate lawyer for advice.
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