If you’re facing foreclosure on your home, there are several different options you can explore. This article will help walk you through three of them: the short sale, walking away and the option to sell your home for cash.
Short Sale. A short sale is when you sell your home for less than what you owe on your mortgage. You need authorization from your lender to do this and, while it can seem like a great idea, short sales can often take many months to process. From applying with your lender for short sale approval, to placing the house on the market, to finding a buyer who can meet the lender’s terms (in today’s tight mortgage market, this can be challenging. You also need to sell the house in a time frame specified by the short sale agreement with your lender. If you don’t sell the house in that time, the bank will foreclose upon it.
In addition, some banks issue what are called “deficiency judgments” when they approve a short sale. In this case, you’ll still be liable for paying the difference between your home’s purchase price and your loan balance. If you’re facing foreclosure because of job loss or high medical bills, you may be extremely short of cash and could find it just as difficult to pay the deficiency judgment as it is to pay your monthly mortgage.
Walking Away. You’ve no doubt heard about many people who owe more money on their home loan than their home currently is worth “simply walking away” from their home and its mortgage. This can make sense if you’re using more than half of your income to pay your mortgage.
However, and this a big however, walking away from your mortgage and not even trying to get cash for a home will do extensive damage to your credit rating. You’ll have that foreclosure record on your credit file for seven years and will make it difficult for you to get a credit card, buy cars or even get another job (more and more businesses are looking at applicants’ credit history and “disqualifying” from employment those with a bad credit rating). In addition, walking away may not free you from all of your obligations — your bank could still slap a deficiency judgment on you (see Short Sale, above). If you walk away, the bank also could come after you for the full amount of your mortgage after it takes the trouble to sell a home for cash.
Sell Home for Cash. The great thing about this option is that you can sell your home very quickly, sometimes in a matter of days (rather than the weeks or even months it can take today in certain housing markets). These arrangements are especially attractive because mortgage loans are extremely tough to get today (mortgage lenders are tightening their loan requirements, often stipulating that home buyers have good to great FICO scores and have at least a 20-percent down payment.
Engaging in a cash for home sale to one of the many companies around the country who provide this service can be a great way to sell the home for cash in a lender-approved short sale. Because the investor is paying for your house with cash, there are no long forms to fill out and no long wait for a loan approval.
You’ll also save several thousand dollars on real estate agent commissions because these cash for home transactions require no middle man (or woman).