As a broker in Tyrone, Georgia (Fayette County) I am often asked “What is a Short Sale?” A short sale occurs when a homeowner owes an amount on their property that is higher than the current market value and the homeowners mortgage lender accepts less than the full balance of the loan at closing.
In order for the homeowner to qualify for a short sale there must be a financial hardship, a monthly shortfall of income, no assets and approval from the mortgage lender. A homeowner without a financial hardship that is underwater with their mortgage payment will most likely not qualify for a short sale.
There are several different financial hardships that qualify for a short sale. Most common are:
Payment increase (can be due to interest rate adjustment, tax or insurance increase)
Loss of income/Job Loss
Death of a spouse or family member
Damage to the property
Here’s my formula Hardship+Monthly Shortfall+No Assets=Short Sale+Release of Liability to qualify sellers for a short sale.
The reasons a short sale is beneficial to the seller is that
- they are released from their debt owed to their mortgage company
- after a foreclosure the mortgage lender can still file for a deficiency judgment against any amount not recuperated at the bank sale
- 3.)Many employers run credit checks and will not hire those with foreclosures
- Security clearances can be jeopardized by a foreclosure
- a foreclosure on your credit report could lower the score by as much as 300+ points
- After 2 years you can apply for a mortgage with a short sale while foreclosures have a 7 year period.
- Lenders report short sales differently, many report “paid in full for less than agreed,” “debt settled,” and some report the short sale as a charge off. Any payments missed will remain on your credit however.
Unfortunately, many distressed homeowners don’t know this option is available. However many Metro Atlanta foreclosures are available.
In 2008, I became a specialist in this field as a result of our declining real estate market in Tyrone and Fayette county in general. Since that time, I’ve helped many Metro Atlanta sellers avoid foreclosure by helping them sell their homes using a short sale transaction.