Financial troubles can hit even the most prepared of people. Injuries or illnesses can strike out of the blue and cost a lot to treat, as well as hamper a person’s ability to earn an income. Employers can move far away, shut up shop or make drastic cuts to the workforce without giving much notice to those who rely on them for their wages. And licensed professionals can find themselves owing vast sums after losing a claim filed against them.
If your financial circumstances take an unexpected downturn, you could find yourself unable to pay the mortgage and be left with the prospect of your lender foreclosing on the property, leaving you nowhere to live. In cases such as this, a short sale might make sense.
Limiting your losses
Short selling a house means you sell the property for less than it is worth. You will effectively lose all the money you have invested in the house through the deposit and mortgage payments you have paid up to this point. But you would lose the property anyway if you do not quickly find a way to get back on track with your mortgage payments, and the lender forecloses on it.
If you do wish to pursue a short sale, you will need your mortgage lender’s agreement. They will lose money on it, too, so they’d need a good reason to accept your request. It’s the sort of decision they might agree to if the market has crashed badly, which could occur if a big employer pulls out of the town or a major recession hits the economy.
Short selling will hurt your credit score, but it will do so less than a foreclosure would. All in all, it is not a decision to take lightly, so you should seek guidance to learn more if you think it might be an option for you.