Short Sale To Stop A Foreclosure.
Home prices that have decreased are giving rise to an alternative to stop foreclosures that can help people get out of homes that they can no longer afford or pay the mortgage on.  A few years ago, when the economy was stronger and when home prices were fairly rapidly rising, people who fell behind on their mortgage, or lost a job, could sell their home and move on to something they could afford.  Now, rapidly declining home values mean that many families can’t sell their house for enough to pay off the mortgage.  In these cases, what is called a “Short Sale” is an attractive alternative.

What Is A Short Sale?
When you sell your home, the mortgage lender will agree to accept less than the current mortgage balance as payment in full for the outstanding loan because it’s a less costly route for the lender than the foreclosure process.  While both a Short Sale and a foreclosure will result in losses for a lender, with foreclosure the lender now owns the home, has more risk, and they now have the added cost of both maintaining, owning, and selling homes.  For the homeowner, Short Sales help the homeowner not have to face the embarrassment of eviction and foreclosure.

Will A Short Sale Damage My Credit?
Yes, but how much depends.  While a Short Sale will damage a person’s credit score, Fair Issacs, who is the “keeper” of the widely used FICO credit score rating system, says the impact to someone’s credit score depends on other factors as well, such as the composition of the individual’s credit profile, status of other bills and debts, and more.

Wells Fargo, which recently acquired Charlotte’s Wachovia, is one of the nation’s largest mortgage lenders and servicers and is a major player in the real estate market.  Wells Fargo’s approved Short Sales have tripled in the last one-and-a-half years as home prices have declined as unemployment has risen.

How Many Homes Short Sale?
Short Sales usually are not well publicized, so it is hard to get an accurate count.  Unlike foreclosures, there are no standard or consistent reporting of Short Sales in county public records.  However, Realtors across the country say they’ve seen an increase in their local markets.  Unexpected bills, job loss, job transfers, combined with falling home prices, are the primary drivers of Short Sales.

One unofficial study says that, nationwide, Short Sales are up about 20% in the past six (6) months.  But that number may be low.  This number is based on figures collected from mortgage servicers by a multi-state foreclosure prevention group, Pearce.

Home Closings Can Take Longer.
One of the big drawbacks to Short Sales is the added red tape means that closing a deal can take months, which sometimes becomes a potential turnoff for buyers, sellers, and even the real estate agents.  Short Sales take longer to close because everyone being short changed and potentially losing money must approve the deals.


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