What Are the Pros and Cons of Short Sales?

 Posted on September 17,2024 in Real Estate

Owning a home can feel empowering. It can provide security, stability, and financial benefits. Sometimes, however, homeowners face significant challenges that make it a less profitable experience. Career changes, finances, the strength of the economy, and the terms of your mortgage can turn home ownership into an economic hardship.

In such cases, a homeowner may choose to use an option called a short sale. A short sale is a type of solution for real estate owners who are experiencing financial distress, though it has significant advantages and drawbacks. This article will discuss what a short sale is, the pros and cons of short selling, and how to contact an experienced Illinois real estate attorney for more details.

What Is a Short Sale?

A short sale is when a homeowner sells real estate for less than what he or she owes on the mortgage. It is sometimes done to avoid foreclosure of the property by the bank. The homeowner uses the money from the short sale to cover some or most of the outstanding debt. For example: suppose you owe $650,000 on a mortgage and you sell the house for $550,000. Your outstanding debt, referred to as a deficiency, would be $100,000.

In some cases, the bank may forgive the remaining debt. Other times, the bank will demand the owner pay off the rest of the mortgage.

A short sale is conducted with the approval of the bank. The homeowner typically must show proof of financial distress to obtain that approval.

What Are the Pros of a Short Sale?

There are several advantages to short-selling a property:

• It can help you pay off your debt more quickly.
• It avoids foreclosure, which can severely damage your credit score and affect your ability to qualify for future loans.
• It can help ease your financial burden when you have less or no outstanding mortgage debt.
• It avoids the publicity of a foreclosure.

What Are the Cons of a Short Sale?

Short sales also come with several disadvantages:

• It can still adversely affect your credit score, though not as much as a foreclosure would.
• You have less control over the short sale process because the lender must approve the sale.
• Even after the sale, you can still be left with outstanding debt. The lender sometimes waives the deficiency, meaning the homeowner’s entire mortgage debt is forgiven. However, this does not always happen, because it means the lender is not being paid back in full.

Contact a Glen Ellyn, IL Short Sale Attorney

A short sale can be a good solution for homeowners who want to get rid of some or all of their mortgage debt quickly. However, it is often a long and complex process that is best facilitated by a DuPage County, IL real estate lawyer. At NN Legal Group, we are ready to provide you with excellent and unparalleled legal services for all your real estate needs. Schedule a free consultation with an English-speaking or Spanish-speaking attorney by calling [[phone] today.