Prevent Foreclosures

Sometimes, you can avoid having to go through the foreclosure process by doing a real estate short sale. Real estate short sales are commonly associated with upside down mortgages. When a homeowner is upside down, which means he or she owes more than his or her home is worth, then it does not make much sense to sell the home because the proceed from the sale will not be enough to pay the bank off. If the homeowner is only a little upside down, he or she may decide to fork up the difference out of pocket. However, most of the time, upside down homeowners do not have the money to pay up the differences. This is why a short sale is necessary.

When the bank feels that there is no way the homeowner could pay what he/she owes in full, the bank may decide that some payment is better than no payment at all. The bank may also decide that it is more profitable to go ahead and accept a short sale proposal rather than proceed with the foreclosure process. After all, in this buyers market, the bank is not likely to be able to sell a home for a large amount of money.

What are the benefits of a real estate short sale?

The main benefit of doing a short sale for a homeowners is to be able to get out of the mortgage obligation without having to pay it in full. If the homeowner is in foreclosure, the short sale will stop the foreclosure. That means, you should not have foreclosure on your credit record. However, sometimes, the bank has sent  your account to a collection agency or has reported foreclosure to the credit bureaus and then do not send them updates after the account has been settled under a short sale agreement. If this is the case for you, then it is up to you to make sure that the bank send proper notifications to credit bureaus and collection agencies or you can dispute with the credit bureaus yourself.

The effects of short sale on your credit

Unlike a foreclosure, having a short sale on your credit report is not as damaging but it is not totally good either. Usually, you will be able to borrow money sooner with a short sale on your credit record than a foreclosure or bankruptcy. So, if a short sale is an option for you, then credit-wise, it is a good option for you to take. However, you need to also consider disadvantages of doing a short sale too. With a short sale on your credit record, the interest rate you are going to get will still be high but not as high as you would get with a foreclosure or bankruptcy on it.

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