photo credit: Margaret Anne Clarke
Have you noticed the rise of short sales in the Chicago lately? Maybe you’ve heard the term mentioned, but don’t have a clear idea of what it means. Most people don’t understand short sales, so this explanation is an attempt to make the term a bit clearer.
Short sales are an option to default. They allow homes to be sold for less than the mortgage amounts, with lender approval. The lender must accept the short sale amount in lieu of the original mortgage amount. An example would be if you owed $250,000 on your home and in the current market no buyer would pay over $125,000. If you sold your home for that amount, you, as the seller, would need to repay the remaining $125,000. That would result in an enormous loss. That is when a short sale can be an alternative. You, as seller, would negotiate with the lender to have all sale proceeds paid directly to the lender and the loan balance could either be forgiven or substantially reduced.
Although not the best solution, a short sale may be a good option if foreclosure is imminent. There are consequences to short sales. Since the lender agrees to a loss on a loan, the seller may have a negative mark on his credit. The buyer, may have an exaggerated delay on getting the home, too. Processing speed has increased lately, but some deals may not close for six months, or may actually slip into foreclosure before finalization. Please consult with us if you are considering this option. We know Chicago and can help you determine if your short sale home is worth the risk.