Short Sale Is Good For Other Than a Foreclosure Alternative — Short Sale Credit
A short sale is an alternative to a foreclosure that allows a homeowner to salvage his credit. But a short sale can also be used to get yourself from under a loan that is causing you to pay more than the house is worth.
Let’s imagine that you have discovered that your home is worth say $160,000 and you are paying off a loan of $200,000. Of course, you don’t want to continue throwing good money after bad. You want to stop the bleeding. So you decide to sell your home and end this unfair obligation. But you need your lender’s permission to sell the home. And if the sale brings in less than the value of the home, then the lender can demand that you pay him the short fall. So, if you sell the home for $160,000 and commissions and closing costs, etc. dwindle that sum down to $150,000, then the lender can demand that you pay him the $50,000 shortfall. What if you don’t have it? then what can you do?
You can convince the lender to agree to a short sale. This way he gets at least some of his loss back. However, to make certain that this works for you, you need to get the lender to agree that the short sale removes you from any obligation on the loan and that he tells the credit people that a settlement has been agreed to so you keep your good credit.
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