As home prices skyrocketed between the years 2000 and 2005, lending institutions created innovative finance programs so that people could continue buying houses. With schemes like zero down payment, interest only loans, adjustable rate loans option, negative amortization loans, ARMs loans, etc, some people were able to buy houses that their income, credit history, or debt level would otherwise have not allowed.
In the past few years, the boom in the real in real estate markets is slowly becoming a whimper. Some markets even have falling property prices. That being the state of things, several homeowners are realizing that their home loan amount that is much greater than the price of their home. If homeowners do not make their monthly mortgage payment, there is a possibility of a default on the loan and foreclosure of the property by the lending institution
Short sale offers a solution in a situation like this. The term short sale describes a situation where there is a risk that the homeowner may default on his or her loan. The lender agrees to sell the property at a much lower price than the original appraisal price, to avoid foreclosure. Short sale is not the lenders’ method of choice. They may use it under dire circumstances that create a financial emergency such as loss of job or death of the earning spouse.
A short sale of Dallas investment property (or other locations) offers something to everyone. The lender gets a chance to recover at least some part of the loan amount. The home owner gets relieved from the financial stress and the possibility of an embarrassing foreclosure. And the new home buyer gets a house priced way below its original appraisal price. In case a short sale doesn’t come through, foreclosure is inevitable.
With the increase in the rate of foreclosures, short sales may soon be practiced more often. According to Business 2.0 Magazine, the top 10 foreclosures markets are:
1. Greeley, CO
2. Detroit, MI
3. Miami, FL
4. Indianapolis, IN
5. Fort Lauderdale, FL
6. Denver, CO
7.Dayton, OH
8.Dallas, TX
9.Fort Worth, TX
10.Atlanta, GA
Depending on how it is reported by the lender, a short sale of something like Dallas real estate could or could not impact a homeowner’s credit. A ‘full payment of the debt’ report is benign, whereas a ‘settled’ report will be negatively impact the borrower’s credit. Even if the loan amount is waived off by the lender, the homeowner still faces the problem of paying tax on it.