A Short Sale occurs when a lender agrees to accept an offer on your home that is less than the amount owed against the home. This occurs when there is little or no equity in the home to pay all closing costs and sales commissions. Not all lenders will negotiate a short sale. You will be required to provide documentation about your earnings, financial hardship and other information requested by the lender. It is advisable to contact a real estate professional and an attorney to help you navigate through this process.
Currently there appears to be less damage to a credit report and a faster ability to obtain credit to purchase a new home after a short sale involving late pays than a foreclosure. This may be due to fact that borrower/home owner finds a potential purchaser for the property and while the lender may ultimately loose money on the deal, they save money on legal expenses and do not have to potentially take back the home, pay insurance or market the homeon their own.
Moreover, another advantage is the ability to buy another home within 2 years over the 5- to 7-year period required for foreclosures. And there are other short sale advantages over a foreclosure. But seek legal and tax advice before making that decision.
FHA adopted guidelines in 2010 that say a seller who is current and does a short sale may qualify to immediately buy another home. Lenders aren’t so quick to follow those guidelines.
There is more awareness of short sales in light of the current economic slow down and housing market. There seem to be many new and proposed government directives to encourage short sales to reduce the large number of homes facing potential foreclosure and large supply of homes for sale.
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Maryland Family and Real Estate Law 