Short sales are on the rise.
A Short Sale is when a homeowner sells a property for an amount less than what is owed to the lender. This is meant to avoid the time, energy and money involved in foreclosing on a property. Also, it means that the lender isn’t at risk of becoming responsible for another vacant property should there be no sufficient third part bids at the foreclosure auction. The benefits to a borrower include less credit damage, the possible release of liability for any deficiency, and the ability to purchase another property sooner than after a foreclosure.
According to Wall Street Journal’s House Talk, short sales account for around 10% of home sales. And they’re only getting more common as lenders relax approval guidelines.
Typically, a borrower must wait two years following a short sale (versus three after a foreclosure). However, the wait may be reduced if a borrower has paid their bills promptly since the short sale and can show that it was caused by extenuating circumstances such as a job transfer, death of a mortgage holder, accident or severe illness.
Freddie Mac offers encouragement to those wishing to purchase again after a short sale:
If you do decide to pursue homeownership again, your next mortgage lender will be paying close attention to your credit, looking carefully to determine how likely you are to make your payments successfully. The better your credit score, the better your chances. As with most worthwhile things in life, preparation leads to good results. If you’d like to own a home again someday, start your preparation today. Stay positive and stay focused, and in time you’ll reach your goal.
There are also other options to explore such as seller financing and lease-purchase, which would allow you to put a portion of your rent towards the purchase price. However, convincing sellers to accept either of these alternatives may require some salesmanship and incentives, such as higher interest rates and/or an above-market purchase price.
In any case, do not become discouraged. As with anything after a foreclosure or short sale, results may take a bit more work and require both diligence and patience, but reaching your goal of owning a home again is possible!