When someone fails to make timely mortgage payments, they will often lose the home to foreclosure, which means the lender takes possession of the home and the borrower must leave. Foreclosed homes are then usually either sold traditionally, through a real estate agent, or at an auction. A foreclosure can be devastating to any consumer’s credit record. As an alternative, some consider short sales instead as a way to avoid foreclosure.
A short sale is frequently used as a substitute for foreclosure because it mitigates extra expenses and charges to both the borrower and lender. Additionally, credit is usually not damaged as much when compared to a foreclosure, but a short sale can be much more complex and usually involves much more paperwork.
When the market value of the home is less than the outstanding mortgage principal, and the borrower falls behind on mortgage payments, the lender (one or more banks) may decide to accept a short sale instead of foreclosing on the property. The proceeds from selling a home through a short sale fall short of the mortgage balance, hence the name “short” sale. Any unpaid balance due to the creditors is referred to as a deficiency. Short sale agreements do not always release a borrower from their financial duties to repay any deficiencies of the mortgage, unless both parties agreed to these terms.
Purchasing a home in a short sale often takes much longer because it’s not just the seller and buyer who have to agree to the transaction. All the creditors that hold a lien on the home have to agree to the short sale. If the initial lender re-sold the first mortgage, it may now be owned by more than one bank. If there is a second mortgage on the property, the bank in the second mortgage also may be a lienholder. Getting all lenders to agree on a short sale can take a while, and could even stop the deal from closing if one of the lenders does not agree.
Have you fallen behind on mortgage payments? At Peachtree Financial Solutions, we want to help you so that you don’t lose your home. If you are receiving structured settlement or annuity payments, we can purchase some or all of them for a lump sum payout. Peachtree Financial Solutions offers lump sum payouts to individuals needing cash now to pay for bills, expenses, and to catch up on mortgage payments. Contact Peachtree Financial Solutions today to learn more about receiving lump sum payouts for the sale of your future payments.
Nothing above is meant to provide financial or tax advice. You should meet with appropriate professionals for such services.