No homeowner, on the signing day for a new home, imagines he or she will face a foreclosure. But the economic downturn and real estate market crash combined to plunge an unprecedented number of homeowners into the distressing process of losing their homes. The foreclosure process can be long, stressful and severely damaging to the homeowner's savings, assets and credit. It's a frightening situation.
However, there is another option for some homeowners. A short sale is a transaction in which the bank lets the delinquent homeowner sell the home for less than what's owed. The borrower finds an agent and puts the house on the market, often at a substantial discount. The hope is that, if the home sells, the lender will recoup the majority of what the homeowner owes. This saves the lender the expense of a foreclosure suit and the possible long-term cost of owning a hard-to-sell foreclosed home [source: Foust].
A short sale doesn't absolve the borrower from the debt he or she incurred with the original mortgage, but it can be better than a full-on foreclosure.
Let's take a look at 10 reasons why a short sale may present a better option than letting your home slide into the long, draining process of foreclosure.