Archive for the ‘Short Sale’ Category

Short Sale or Foreclosure?

As a rule of thumb, especially if you’re looking to protect your credit, a short sale is better than letting a house go in foreclosure. This article will go into some of the pros and cons of each option.

What is a Short Sale and is it the right choice for me?

First of all the sale must be to a bona fide purchaser at arms length, that is someone who is not related to you who uses their own money to purchase the property. The buyer must be a completely disinterested party, it can’t be a relative or someone who buys the property on your behalf. The reason it is called a short sale, is because the purchase price is for less than what you owe, meaning the property is underwater, and you owe more than what it is worth. In most instances, these properties will be in foreclosure, and in a lot of instances a bank will not accept a short sale application unless you are in default and behind on your mortgage.

Short Sales vs. Foreclosure

There are a few benefits of a short sale vs a foreclosure including:

1. The short sale looks better on your credit report. Usually a short sale will report to your credit as settled for less than what is owed, which may even erase all prior missed payments. This is much better than a foreclosure judgement and auction showing in the public record section of your credit, not to mention all of the missed payments.

2. Release of deficiency – usually a completed short sale will release the seller from any residual amounts owed after the sale. If you sell the property for $30,000 less than what you owe the bank should release you for that remaining amount. In addition, the bank will usually pay all fees out of the proceeds, which include closing attorney fees, broker commissions, real estate taxes and closing costs. This means in many cases the short sale costs the seller nothing out of pocket.

The Cons of Short Sales

In many instances if your mortgage is already in default, there’s a good chance that there are other issues with your finances. Maybe you have credit card debt, maybe your car is facing repossession. If you are facing any of these issues, then a short sale will not help all that much, you are much better protecting all facets of your finances with a bankruptcy.

In addition, a bank will commonly request a seller contribution to release the deficiency. This means the bank will request either a lump sum payment or will request the seller to sign a note to the bank, which will require monthly payments up to a certain amount. This is very common, and as I said earlier if you have other financial issues, this will not help you. A bankruptcy will solve all of your issues, but a short sale just deals with the house, which makes no sense especially if you have to pay to get out of the mortgage.

If you would like to speak with a Chicago Foreclosure Attorney who has handled multiple shorts sales and bankruptcies call 312-493-6912 for a free consultation.

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(312) 493-6912

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At The Law Offices of Steven J. Grace, based in Chicago, Illinois, we represent clients throughout Chicagoland, including the cities of Deerfield, Jefferson Park, Lisle, Northbrook, Oak Brook, Park Ridge, Schaumburg, St. Charles and Warrenville; and other communities in Cook County, Dupage County, Will County, Grundy County, Kendall County, Kane County, LaSalle County and Lake County.