What is a short sale and how does it benefit you here in Chicago?
If you’re thinking that question about yourself… great question!
In this article we’ll dive into that question so you as a Chicago IL home owner can tell what your options are during foreclosure or just if your home mortgage is underwater.
What is a Short Sale and How Does it Benefit You?
A short sale is a method of selling your house while you are in foreclosure (here’s a great definition of what a foreclosure is in case you’re not sure), Typically, in a short sale situation the mortgage balance you owe to the bank will be more than the value of the property which means the property is underwater.
After the financial crisis in 2008 short sales were very common as so many distressed properties came to market at the same time. As the market has slowly improved over the past few years, lenders have been less likely to offer borrowers the short sale option. However, the pandemic has created another economic crisis that has made it difficult for many Chicago homeowners to pay their mortgage. We believe as the forbearance programs expire and we transition to normal operations there will be a spike in distressed sales with many owners considering the short sale option.
Here are a few reasons you may want to consider short sale on your Chicago home
You Avoid Foreclosure And The Harmful Effects Of It
The best benefit of short sale is that you avoid a foreclosure on your home.
A foreclosure will be a blemish on credit history and can stay on your credit report for up to 7 years. Having a record of foreclosure on your credit report will not only prevent your from being able to get a new home loan for several years but can impact your ability to borrow money for other needs (such as a car) as well.
Even renting will become more difficult as your credit score would be affected, and you often have to disclose a foreclosure on a rental application. Foreclosures can also last a long time (up to 7 years as mentioned above), making you wait years to even qualify for a new mortgage.
Credit Worries
With a foreclosure, you face all kinds of ramifications with your credit. As previously mentioned, buying a car and renting a house will be difficult if not impossible through the normal bank loan routes. If you are able to obtain a loan for a car your interest will be higher with a lower credit score ultimately making your living expenses higher as you are trying to get back on track financially.
If you work with money at your job you could even face termination if your employer puts a lot of stock in that kind of thing (most employers won’t but it has been done before).
A short sale relieves the debt that is left over from what is owed on the mortgage, letting both the bank and the seller move on. A short sale is also easier on your credit score, which can allow a homeowner the ability to recover in the long run. Your credit report will only show a pre-foreclosure status, which reduces your credit rating minimally compared to a foreclosure.
Buying a New House
A foreclosure can last for a long time, making it impossible to purchase a mortgage again for up to 7 years.
Short sales offer a little more flexibility for the seller, allowing new home applications only 2 years after the filing depending on the bank. It also makes a mortgage lender more likely to approve your loan than if you had a full foreclosure, getting you back into a home faster.
Again, this all depends on the actual bank / lender you’re working with… so if they’re giving you a hard time a year or two after a short sale… shop around and find another bank to work with.
Usually No Fees Involved
One potential benefit of the short sale is there are usually no fees associated with the process from the bank. The banks just want to get the note off of their books… and if it can be proven that your house is “underwater” (you owe more than your house is worth)… and you’re at the risk of walking away from the house… the bank may rather work out a short sale instead of going through a costly foreclosure.
With a foreclosure, your mortgage lender may tack on extra fees that only make the damage worse.
Some real estate consultants may charge a fee for helping facilitate the foreclosure with your bank… so check with them before you enlist a real estate agent or firm in helping you with this.
Our company, Blue Ladder Development may be able to guide you in the right direction on how to give yourself the best shot at a bank approving a short sale with your Chicago area house… so connect with us by calling 630-387-6861 or shoot an email to us through our contact page here.
Getting a Short Sale – What You May Need To Provide
You will have to provide the bank with proof of being unable to pay your mortgage payments. This can be difficult and is best resolved by finding a good real estate attorney in your area that has experience dealing in this type of law. Read through this post to help guide you through and process of finding and working with the right attorney.
If you don’t know who to contact or where to turn to see if a short sale may be a good option for you… get a hold of us.
We won’t charge a thing to discuss your situation with you and let you know your options.
And we can even give you guidance and pointers at absolutely no cost or obligation.
Sometimes we’re actually able to do the work for you or even buy the house from you to get you out from under that mortgage… so that may be a viable option for you.
We buy Chicago houses and we work with home sellers like yourself who are having troubles getting out of your house the traditional way… or who can’t (or don’t want to) go the usual route of listing with an agent.
Get a hold of us anytime to discuss your situation. We’re here for you!
Or, if you want to see what we can offer on your house… click the link below and fill out the form on the next page. We’ll make a no-obligation cash offer to you within 24 hours. At least that way you know whether that is an option for you or not.