Those faced with underwater mortgages may be looking for a way to avoid foreclosure; if so, you have probably heard about or considered the possibility of a short sale. Short sales have a distinct set of advantages, but are not the perfect way to avoid foreclosure by any means. Here are a few common misconceptions about short sales that may have you thinking twice before choosing this path for your underwater mortgage.
A Few Short Sale Myths
One of the most common short sale myths is related to the name of the process: it is, in fact, typically a very protracted, drawn-out ordeal, and by no means to be construed as “short” in the sense of “not taking a long time to complete.” Not that this process is intrinsically awful, but it is worth noting that short sales typically take much longer than regular sales due to the rigorous approval processes involved on behalf of the lender. On the plus side, according to some sources, since short sales are becoming more common the time frame seems to be shrinking somewhat. If you are looking to avoid foreclosure but do not have the patience for what can sometimes feel like a “long sale,” this route might not be for you.
Another prevalent myth is that a short sale has no effect on the seller’s credit rating. While it’s true that, generally speaking, the short sale process is much less of a credit ding than foreclosure would be, those looking to avoid foreclosure to preserve credit may be dismayed to learn that short sales often do show up on credit reports. Much of the detailed info on your specific situation will be wrapped up in the terms of your loan, so be sure you know what effect a short sale will have on your credit before you make any decisions.