What does short sale your home mean? The common short sale definition is that a short sale is when a home seller gets permission from their mortgage company to sell their home at a sales price less than what is owed on the mortgage. Said in another way, a short sale is where your mortgage company authorizes you to sell your home for less than what you owe on it.
A Short Sale may be appropriate for a home seller whose mortgage balance is $250,000 but whose home wouldn’t sell for more than $220,000. Rather than the lender foreclosing on the home which would cost it money and then it would have to sell it which would cost it even more money, the lender would authorize a short sale on the home to save itself money.
A situation where a lender would not likely authorize a short sale would be if the home were worth closer to the mortgage balance and the lender could get more for the home if they foreclosed and then subsequently sold the home as a repossessed home.
What Are The Effects Of Short Sale?
In most cases, short sales are a preferable alternative to foreclosure but the process still impacts both the homeowner and the mortgage lender.
The homeowner is penalized with a derogatory major tradeline on their credit for not fulfilling a mortgage obligation which leads to a drop in credit score.
The lender is forced to take a loss on a mortgage loan.
Homeowner in a short sale can qualify for a new mortgage after only two years versus 3-4 years with a foreclosure.
More positively though – a short sale allows for a bad housing situation to get resolved – the home seller gets out of their home and a new homeowner takes over with a mortgage that makes sense. Short sales get the housing market started again. Also, with a new homeowner in the home with the right mortgage situation, in theory the new homeowner would be more likely to take care of the home thus helping to keep the value of the home and the neighborhood elevated. Both of these scenarios would have a positive impact on the housing market.
About The Short Sale Process
The process of getting a Short Sale approved varies from lender-to-lender and can be time-intensive. Home sellers should not go at it alone — speaking with a real estate agent about the proper protocol is usually the best place to start. And sellers should be aware of how a Short Sale on their credit can impact future borrowing.
Citibank is one of largest lenders in the US. Learn more about the Citibank Mortgage Loan Modification.