A short sale is when your mortgage lender allows you to sell your property for an amount less than what you currently owe. For example: If the unpaid balance of a loan is, say, $400,000 and a property’s “fair market value” is now $250,000, under a short sale the lender might accept $250,000 as payment in full. You will not receive funds from the sale, because there is no equity. Your lender DOES NOT want you to foreclose. They want to help you. A short sale may be the answer to your financial hardship.
Wondering if you should simply “walk away” and let the property foreclose vs. sell your property as a short sale? This is a question many homeowners ask. Foreclosure is not a good option and can have severe consequences, including deficiency judgments to pay back your lender (and even your mortgage insurer) for the remaining balance, wage garnishment and sometimes loss of one’s job. You may be sued many years after you think it is all over and you are back on your feet.
NEGATIVE EQUITY, often referred to as “UNDERWATER” or “UPSIDE DOWN,” means that you owe more on your mortgage than your home is worth. Negative equity can occur because of a decline in property value, an increase in mortgage debt or a combination of both.