A Short Sale Can Free You From Paying More for Your Home Than It’s Worth — Short Sale Credit
April 24th, 2008
Whatever the reason, you discover after living in your home for several years that it is now worth less than what you are paying for it. In short, it has become a burden that you can no longer carry. So what do you do?
Of course, the best alternative is to sell the home and get out from under the weight. But if you don’t already know, then you will soon discover that you need your lender to agree to the sale. Of course, he wants to make certain that he gets a full return of his investment. So you may be required to pay him cash if the sale falls short. In other words, if you owe $200,000 but your house is worth $160,000, then there is a good possibility that you will not get the $160,000 when you sell your home. Closing costs, commissions for the real estate agent and other things could reduce the sum to say $150,000. You’re $50,000 short and the lender wants that money so he gets the entire $160,000. So you may have to come up with the $50,000 in order to get the lender to agree to the sale.
Let’s face it. There are lenders out there who will hard ball you. If you say you don’t have the money to compensate for the shortfall, then the lender can push for a review of your assets to see if he can tap something you may not be telling him about. He is welcomed to your assets. He cannot tap protected investments like a retirement account.
If you don’t have the extra cash to match the worth, then you could be stuck. One alternative, however, is to convince the lender to go with a short sale. In a short sale, you sell the house for the best price you can get and the lender gets his money at closing. Then he agrees to release you from any obligation of the loan and notifies the credit organizations that a settlement has been achieved. This preserves your good credit. Now you and your family can walk away and you’ve ended the financial bleeding and you can look forward to a future where you aren’t paying more than your house is worth.
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