When someone is badly injured and unable to work for months at a time, it can make things financially tight for people. Without a steady paycheck coming in, many people find themselves with mounting debt, with no way to pay it. If you have found yourself in financial dismay after an injury, you may want to consider what debts you can get rid of to make your life more manageable.
If you have a mortgage that you pay each month, there’s a good chance that it is for a significant amount of money. If you were to get rid of your mortgage, it would allow you to get back on track financially and reduce a lot of the stress that you feel. If you owe a lot of money on your mortgage and can’t afford to pay it anymore, you could sell it.
Many people assume that if they owe more for the house than it’s worth, they can’t sell it; fortunately, that isn’t necessarily the case
What is a Short Sale?
The questions that many ask when faced with this kind of financial decision is typically “What is a short sale? and, “How fast is ‘short’?”
A short sale is a type of real estate sale where a seller can sell a home for less than they owe a lender for it. The lender has to agree to the amount that the house is sold for and the seller is still responsible for the remaining amount left on the loan.
The name short sale can be misleading though—contrary to the name, the length of time it takes to sell a house with a short sale is no shorter than the amount of time that it takes to sell a house normally.
Who Qualifies for a Short Sale?
A seller who is deep into debt and is completely unable to pay their bills on time might be able to qualify for a short sale. In order to be able to list your home as a short sale property, you must turn in proofof your financial hardship to your lender.
You need to be able to prove how much money you have coming in each month, as well. The lender may require you to prove that you have no way to pay off the money that you owe, such as selling extra vehicles, stocks, or bonds.
What Qualifies as a Financial Hardship?
In order to get approval for a short sale, you must be able to prove that you’re having a financial hardship. Simply not having the money to pay your mortgage on time one month does not count as a financial hardship. You need to be able to prove that you cannot pay your mortgage for multiple months and that you have no way to repay the missing payments in a timely fashion.
The lender will scour through the money that you have to pay to debtors each month to assess how deep in debt you really are. This allows them to determine if it will be impossible for you to repay your debt or if it’s possible for you to repay everything if slight accommodations are made for you, such as adding a grace period for payments.
Who Sells the Home?
There are some people who assume that the lender takes care of the sale of the home when it’s approved for a short sale. As the homeowner, you are still responsible for hiring a real estate agent to handle the sale of your home. When it sells, you will be responsible for paying them their fee, not the lender.
It’s best to hire a real estate agent that works with short sales often so that he or she can handle the sale appropriately. There are intricate details associated with a short sale and if they aren’t done properly, it could cause the sale to fall through. It’s important to let the agent know from the start that the house is a short sale so that they can market it the right away.
Is a Short Sale Guaranteed to be Accepted?
Homeowners often assume that once a lender approves to allow a home to be sold as a short sale, they will accept any offer that is made by a potential buyer. That is not the case at all though. The lender will take the time to figure out how much money you can afford to pay each month and then assess how low of an offer they can accept to leave you with a remaining debt you can afford to repay.
When a buyer makes an offer to buy the home, the lender can deny the amount that they offer, even if it is a guaranteed sale. Finding a buyer who is preapproved for the amount that they are offering can increase the chances of the lender accepting the offer that is given. This is because they know that they’ll be able to get that amount of money right away rather than having to wait for you to repay it.
Does the Remaining Debt Have to be Paid at Closing?
Whatever amount is left from the mortgage after the short sale is accepted will have to be repaid over time to the lender. The lender will determine what your monthly payments will be and will add interest to the total amount that you are required to repay. It’s important to make the payments on time and in full.
If you aren’t able to make a payment or you need to pay later than you are supposed to, it’s best to contact the company ahead of time so that you can let them know about the situation. There are some companies that offer grace periods where they don’t charge addiction fees for late payments if they’re made within that certain period of time.
Do You Have to Move Out of the House Right Away?
When the house sells as a short sale, there will be stipulations put in place to ensure that you do not have to move out of the house right away. You are typically given a month to 45 days to remove your belongings from the home. It can be very difficult to get an extension after a short sale has taken place so it’s best to hire movers to help you with the process so that you can be sure that everything is out in time.
Once the house has sold, there is no turning back. A short sale can affect your credit in a negative way, but when you pay it off, it will greatly improve your credit score. You’ll owe less and prove that you can be responsible and pay back your debts.
It can be nearly impossible to get a loan for a new home while you still owe money on a short sale. After you’ve paid off the loan, you can explain the situation to a new lender and they may approve you for a new loan. Lenders can do research to find out if you had a short sale in the past, so being upfront and honest with them from the start is important.
