It’s no surprise that the number of short sales is increasing in today‘s economy.  The California Association of Realtors states that short sales have begun a steady climb that has not stopped while traditional sales actually surged above 50% for most of 2010. In some real estate markets, fewer than one in ten short sales actually close. So before selling a short sale home or purchasing one, here are some of the basics everyone should know.

The Basics- What is a short sale anyway?

A short sale is a lengthy process where a property sells for less than the balance owed on its mortgage, according to A short sale can be a home that’s upside down in it’s mortgage or even an apartment building. Basically, if there is a mortgage balance that’s more than the market value of the home that’s considered to be a short sale. Short sales are considered to cost lenders less than a foreclosure and is sometimes the more popular choice for distressed homeowners.

Details- How to qualify for a short sale.

Qualifying for a short sale isn’t always an easy process. Your particular case must qualify as a true hardship which could be loss of employment, divorce or bankruptcy, or even fatal illness. So unfortunately banks aren’t obligated to grant short sales unless the necessary circumstances are in place. Homeowners can also qualify for a short sale if they already have a willing buyer lined up to purchased the property or if they are just willing to short sale directly to the bank. 

Effects- How a short sale can affect you.

A short sale doesn’t always guarantee that a homeowner will be out of the woods. Even though a short sale will help you avoid foreclosure, it still can lower credit score by as much as 300 points. In some instances the forgiven debt could count as taxable income that you end up owing taxes on later. There have even been situations that affect homeowner credit such as higher credit card interest rates. Few homeowners are lucky enough to work with lenders who forgive their balance owed.

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