Q and A: What's The Benefit Of Doing A Short Sale
October 29, 2009
Less costly, and less destructive then a foreclosure, the benefits of a short sale are good for all parties involved.
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Q. Is there a benefit of doing a short sale vs. letting the home go to foreclosure. What's the benefit for the home owner and for the bank?
A. A foreclosure is a nasty thing. It's a very negative process with a more destructive effect on all parties involved, and especially more destructive where it matters most for the home owners and the community.
The short sale is not a negative experience. They are sometimes done for reasons other then distress and often sellers sign notes paying off the difference that resulted in the short sale voluntarily: this happens when there is a job transfer or a need to move for other reasons, not necessarily that the owner cannot afford the home.
Benefit to the homeowner:
- Debt is satisfied for less then full amount.
- Foreclosure is avoided on the credit record. By the way it will take more years before you can buy a home with a foreclosure on the record vs. a short sale.
- You MAY avoid the pursuit of a deficiency or judgment.
- It may limit the liability to the IRS.
Benefit to the bank:
- Avoids a foreclosure, that expense and and REO on their portfolio.
- Enhances the relationship with investors.
- There are incentives from the government to do a short sale.
- Avoid the added expense of servicing the loans.
- Investor relations are improved.
Other Benefits:
- The neighborhood avoids the blight of a foreclosure and the price impact.
There are a multitude of additional benefits to a short sale vs. letting the home go into foreclosure. The process is has become easier and smoother and it's a more natural process less threatening and much less negative then a foreclosure. Please verify any legal and financial questions and implications with our legal counsel and CPA.
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