Loss Mitigation Blog

Short sale is one of the most common form of loss mitigation, especially these days as more and more homeowners fall into financial distress. Simply put, a short sale is when a lender agrees to let the homeowner sell the home for a discounted price and forgives the rest of the balance. Not all lenders will approve short sale, however, and like any other loss mitigation measure, it takes a fair bit of work from the borrower.

Why choose a short sale?
The main advantage of a short sale is that it’s less damaging to the borrower’s credit than a foreclosure. A foreclosure normally stays on one’s credit record for up to ten years, while a short sale can usually be cleared in five or less. Short sales are also quicker compared to foreclosures and loan modification, so once they’re approved, borrowers can start working their way back to financial stability sooner.

What are the drawbacks?
Perhaps the most obvious disadvantage to short sales is that you don’t get to keep your home—you just get off the hook on your mortgage. There may also be tax implications, depending in your situation. The process itself isn’t easy; it involves a lot of paperwork, negotiation, research and marketing. And since you have to find a new home on top of that, handling a short sale without professional help can be quite a challenge.