When to consider a short sale
No one ever plans to find themselves in over their head with debt and behind on mortgage payments. But for thousands of people all over this country, this is an everyday reality that requires proactive – and sometimes legal – steps to get out of.
A lot of people in this kind of situation assume that because they are behind on home payments, their only option is to foreclose on their home. But in reality, in-debt homeowners do have other options, including short sales. But just because you qualify for a short sale, is it really the right option for you?
You might want to consider a short sale if:
Downsizing would help reduce your debt. A change in job, a relocation or the loss of a spouse’s income can make many people reevaluate their living situation. But if your home is worth less than what you owe on your mortgage, selling your home might not seem like the best idea unless you knew the bank or financial institution would forgive the remaining debt. With a short sale, this may be possible.
You have time to find another place to live. Short sale paperwork can take a long time to sort out and in some cases, a short sale can take even longer if there are no interested buyers. This long wait time may be good for a homeowner who qualifies for a short sale but requires time to find a more affordable housing arrangement.
You’re concerned about your credit score. While it’s true that a short sale can negatively affect your credit score, the impact is different for each person. If you are current on your payments and have never made a late payment, then a short sale may not impact your score as badly as missing a payment or foreclosing on your home, explains a Quicken Loans article.
You plan on filing Chapter 13 bankruptcy. Completing a short sale prior to filing Chapter 13 bankruptcy can not only reduce your debt, it can also reduce the amount you will likely pay under your repayment plan. In the long run, this can be more beneficial when it comes to reducing your debt and getting your finances back together.
