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Should You Sell Your Home Short If You Can't Refinance?

Jul 2, 2008
There are a lot of people in a really tough position with their house right now. You can't afford your mortgage payments, you don't qualify for a refinance, and you can't even sell because your property value has dropped so much that your house is worth less than what you owe on it. You may have gotten behind on your mortgage payments or you may be budgeted so tightly just to make your mortgage payments that you can't afford to pay your other bills or buy basic necessities.

If you are in this difficult position, one option you may want to consider is something called a Short Sale. In a short sale, a homeowner and a mortgage company come to an agreement that the mortgage company will accept less as payment on your mortgage that what you owe. They then forgive the rest of the amount that was originally owed on the mortgage.

A short sale can be a benefit to both the mortgage company and the homeowner. The homeowner can get out from under the house they can no longer afford and start over. They no longer have to worry that their house will eventually go into foreclosure. The mortgage company benefits from the house not going into foreclosure because mortgage companies aren't in the business of selling homes. It's a hassle for them with a lot of associated costs and paperwork. They end up having to sell it for less than it's worth anyway during foreclosure. In a foreclosure, you are responsible for the remainder owed on the mortgage, so they have to spend time and money working with you to pay the money back as well. So a short sale is usually much more attractive to a mortgage company than a foreclosure.

There are drawbacks to a short sale. First of all, you won't be able to sell your home and buy a new one with the proceeds. You'll have to find somewhere else to live; either a rental or with friends or family. Your credit will get dinged when you have a short sale on your record. It won't hurt your credit nearly as much as having a foreclosure, but it will be a negative mark. Depending on your State and local laws, you may also have some tax responsibilities after the sale. Speak to a tax professional about this.

With the high number of people currently facing these difficult choices, many mortgage companies are willing to work with homeowners to do a short sale. There are, however, some mortgage companies that aren't. This decision is entirely up to them. There are some factors that may influence them one way or another depending on your circumstances, such as how far the home has dropped in value below the amount owed on the mortgage.

Take some time to decide whether a short sale is right for you by gathering the information together first. Talk to your mortgage company about your options. If you are having financial difficulty that is relatively temporary, your mortgage company may have other programs that can help you get back on your feet, instead of doing a short sale. Once you have the information gathered, sit down and consider what the right choice is for you and your family. Every situation is different, so this is something only you can decide.
About the Author
Refinancing is a big issue right now. A lot of people would be wondering if they should refinance their mortgage. Depending on the situation the pros may outweigh the cons. Get the information you need to decide here: http://www.refinancingright.com
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