No homeowner, when signing the sale agreement, imagines they will default on their mortgage payments. Unfortunately, financial difficulties strike, and when they do, the homeowner may have to grapple with the possibility of losing their home.
During those difficult times, the first thing the lender might think about is foreclosing the property. However, a foreclosure can be a long, stressful and damaging undertaking for both parties. Fortunately, there is another option that lenders can consider. This is known as a short sale.
In real estate, a short sale happens when the lender allows the buyer to sell the property at an amount less than what is due on the current mortgage. But how does a short sale benefit the lender?
A short sale can be favorable to the lender
There are a variety of reasons why a short sale may make financial sense to the lender. Thanks to financial distress, the homeowner is usually several payments behind before the subject of foreclosure can come up. Rather than keeping up with the status quo, a short sale allows you to recoup possible loan costs.
While you can foreclose the home, it is important to understand that foreclosure comes with its share of drawbacks. For instance, foreclosing costs money in terms of eviction and administrative costs. You may also have to fix the property before putting it up for sale since the odds are good that a homeowner who can’t afford the payments also can’t afford repairs and maintenance.
Even after foreclosing, there is never a guarantee that the home will sell. With an empty home, you will be faced with a monthly maintenance bill until you can find a buyer for the property – and real estate that’s just a drain.
A short sale can mitigate your overall loss to a point where it is more sensible to write off than foreclosure. Find out how you can safeguard your rights and interests while short-selling a property.