The Benefits of a Short Sale Over Foreclosure
There is a benefit of doing a short sale vs. letting the home go to foreclosure, but what's the benefit for the home owner and for the bank?
A foreclosure is a nasty activity. It's a very negative process with a more destructive consequences on all parties involved, and especially more hurtful where it matters most: the home owners and the community.
The short sale is not a negative experience, no doubt. They are sometimes done for reasons other then distress and often sellers sign notes paying off the difference that resulted in the short sale voluntarily: this happens when there is a job transfer or a need to move for other reasons, not necessarily that the owner cannot afford the home.
Some benefit to the homeowner:
- Debt is satisfied for less then full amount.
- Foreclosure is avoided on the credit record. By the way it will take more years before you can buy a home with a foreclosure on the record vs. a short sale. In fact, if you're not late and you do a short sale you may be able to buy another home right away.
- You MAY avoid the pursuit of a deficiency or judgment. It may limit the liability to the IRS.
Benefit to the bank:
- Avoids a foreclosure, that expense and and REO on their portfolio.
- Enhances the relationship with investors. There are incentives from the government to do a short sale.
- Avoid the added expense of servicing the loans. Investor relations are improved.
Other Benefits:
- The neighborhood avoids the blight of a foreclosure and the price impact.
There are a multitude of additional benefits to a short sale vs. letting the home go into foreclosure.
The process is has become easier and smoother and it's a more natural process less threatening and much less negative then a foreclosure. Please verify any legal and financial questions and implications with our legal counsel and CPA.
