We have been seeing more homeowners and banks turning to short sales as it was recently reported that a short sale activity has been on the rise for homeowners who may be in an underwater situation looking for a way to escape a distressed home in cases where a homeowner can no longer meet their mortgage payment and factors like negative equity may also be in place. In fact, it was recently reported here at the end of August that short sale activity in the second quarter rose, which could potentially be beneficial due to the fact that this could help the housing market by allowing fewer homes to simply sit empty when foreclosure may be inevitable for a particular homeowner.
Obviously, many homeowners have had a problem where they cannot pay their mortgage payment and when foreclosure takes place banks have seen that these properties are not being filled as fast as they possibly could be, even though mortgage rates are quite low and these homes may be selling at affordable prices as well. The problem that many have faced is that a short sale is, in the opinion of some, not necessarily the best route for a homeowner and some may want to review foreclosure prevention opportunities that could help them keep their home.
However, there are homeowners who are happy to participate in a short sale particularly when the negative equity situation on their home has become quite severe and they are in a position where meeting this mortgage payment has become a problem. Not all homeowners are benefiting from loss mitigation efforts like modifications so foreclosure may be inevitable when certain conditions are in place, but homeowners are happy to use these short sales so that they can rid themselves of a distressed property that has lost value and will have been a problem in their personal financial life.
There are some homeowners who have had problems with short sales though, as these foreclosure alternative options could potentially decrease a homeowner’s credit score despite the fact that they have not gone through foreclosure. It has been the hope of some homeowners to participate in a short sale so that they can avoid problems that may come through a foreclosure, like a decrease in their credit score, but when homeowners participate in certain short sale programs they may get financial assistance to help them relocate, which could be beneficial for homeowners who have seen their financial position deteriorated over the past months as well.
While there are some opportunities for underwater homeowners that may offer assistance when it comes to affordability, it also needs to be remembered that these short sales could be the only option outside of foreclosure for some and if assistance is offered through relocation programs that bring funding to these distressed homeowners, there are those who have found a short sale, while it is not optimal, to be beneficial for their situation. However, homeowners may also find that a short sale may be viewed in a better light than foreclosure, but of course it needs to be the case that a homeowner explores foreclosure prevention options first before turning to a short sale, as there are affordability options that could help homeowners avoid the loss of their home through one of these foreclosure alternatives.