A short sale carries its name because the money you get from selling your home comes short of the amount of debt you owe on the house. A homeowner can't simply sell their home. They have to enter into an agreement with their lender. If the lender agrees to take less money than is actually owed, then you are free from all future payments on that home. People usually choose short sale as an alternative to foreclosure when no other options have worked for them.
A Short sale isn't for everyone. When thinking about short selling your home, you must take into consideration that the sale will negatively affect your credit. You may not want to go through the foreclosure proceedings, which is why short sale is a good option for you. Foreclosure and short sale, according to a recent report, affect your credit score about the same (85-160 points). Other reports state that a short sale can hurt a person's credit score up to 300 points. Change in credit differs case by case and also depends heavily on how late the payments are.
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This kind of option also may hurt your ability to purchase another home for some time. Most people who enter into this type of agreement with their lender have to wait another two years before they can get a lender who will help them buy another home. So if a short sale hurts your credit just as bad as a foreclosure does, and also hurts a person's ability to buy another home, then why do it? There are actually some advantages which should be considered when facing the reality of losing your home.
Agents often encourage homeowners to short sale their homes because they want to take any money they can get. There is a better likelihood of them receiving payment this way rather than letting the home go all the way through the bank to foreclosure. Your home is more than just a place you live, it is a source of identity for you. Selling your home is something people do even when they are not struggling financially, so a quick sale lets you retain some dignity there. You also are able to buy a home sooner than you would with a foreclosure, with which you may have to wait up to seven years.
You must petition to your lender in order to obtain permission for a short sale. This petition must include an estimated price you think you will receive from the sale, a letter explaining hardship, true and honest proof of all income and assets and possibly a market analysis. If they decide to approve your petition, then you will enter into a listing agreement to begin the proceedings on selling your home. If your petition is denied you may want to consider obtaining help from an attorney.
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