First thing to understand, a short sale is when a homeowner, through the approval of their bank or mortgage lender, sells their home for less than what they owe on the mortgage. Potential home buyers must make a short sale offer, and homeowners then communicate this offer to the bank by applying for short sale status. Banks usually require that homeowners provide various documents in order to prove that they are unable to pay the bank back for their home loan. Once this has been completed, banks often send property appraisers to determine whether the short sale should be approved or rejected. There is no guarantee that the bank will approve the short sale offer, but it may be a good option for homeowners who owe more on their home than the property is actually worth. Of course some of the downsides of this option are that the homeowner will then have to find another place to live, and all of the sales proceeds will go to the bank, which also means that they won’t have that money to apply to their next home. Perhaps the biggest downside is that if homeowners aren’t careful in how they negotiate, their lender could pursue a deficiency judgment against them in an effort to collect more money on the mortgage. An article from CNN Money discusses this risk and advises that “if you are pursuing a short sale, be sure your attorney asks the bank to release you from any further obligation.


Bankruptcy versus short sale: If choosing between a short sale and bankruptcy you need to understand that a bankruptcy may initially cause greater damage to your credit score, but in the long run it may be the best option. For one thing, homeowners who file for a Chapter 13 bankruptcy are often able to keep their homes. In a Chapter 7 bankruptcy, homeowners may be able to keep their property if the equity is exempt, meaning that the trustee cannot sell it to pay back creditors. Additionally, the effect of bankruptcy on your credit score can be surprisingly minimal.   You need to speak with an experienced bankruptcy lawyer to learn the effects of bankruptcy on your home.  If you are in Utah contact us at utahbankruptcyguy.com for a free consultation.  #utahbkguy