A short sale can prevent a foreclosure and may reduce your chances of being sued by your lender over a delinquent mortgage. But do you understand the details of this foreclosure alternative? Take this quiz to find out!
What is a short sale?
A short sale has nothing to do with time, and if a homeowner qualifies, it's usually a much better option than entering foreclosure. In a short sale, the bank lets a homeowner who's behind on payments sell his or her home for less than what's owed.
When can you start to consider a short sale?
A lender typically won't consider a short sale until you've missed enough payments that the bank has filed a notice of delinquency, starting the foreclosure process.
Can a short sale hurt your credit?
Foreclosure causes serious damage to your credit. A short sale minimizes that damage since the buyer covers part of the delinquent loan, but you'll still face implications for the amount of the mortgage you couldn't pay. In the end, your credit will take a hit, but it won't be as bad as if you'd entered foreclosure.
How can you prove financial distress to your lender?
Most lenders won't consider a short sale unless the borrower proves financial distress: He or she can't pay the mortgage due to job loss, a death in the family or illness.
Who finds a buyer for a short sale?
A short sale transaction is similar to a normal real estate sale, in that it's the homeowner's responsibility to find a willing and qualified buyer for the property.
What's a fractional interest transfer?
Foreclosure-assistance scam artists sometimes offer fractional interest transfers -- offers to stop a foreclosure in exchange for a percentage of the property ownership -- as part of fraudulent schemes. A short sale is a legal sale transaction.
Does a short sale eliminate your debt to the lender?
A short sale can eliminate most of what you owe your lender; however, they may still sue you for the remaining balance on your original mortgage.
True or false: If you're not behind on mortgage payments yet but anticipate falling behind soon, you can begin the short sale process.
Before you can start the short sale process, you must prove that your home is in mortgage default, meaning you've already missed enough payments that the bank is about to start foreclosure proceedings.
Can any real estate agent handle a short sale?
While a short sale transaction is very similar to a normal real estate sale, it often includes unique limits, such as the bank's foreclosure timeline. Even though any agent should be able to handle the sale, when choosing an agent, it's a good idea to find one who understands these traits.
Aside from helping out the homeowner, what's another benefit of a short sale?
Short sales can help the housing market by keeping foreclosures down, thus keeping property values up. They can also benefit investors who are looking for deals on homes.
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