When you bought your home, you likely financed it at a rate that fit within your budget at the time. Yet, if your circumstances changed – or if you refinanced your home – you may find yourself unable to keep up with your mortgage payments. Since you will want to avoid foreclosure, you can try selling your home in a short sale. Before you do this, it’s crucial to understand how they work in Arizona.
Understanding the process
If you offload your home in a short sale, it means that your mortgage lender will allow you to sell it for less than your mortgage’s unpaid balance. In this case, your lender will receive all the proceeds from the sale. Your lender will then release the lien against your home, which is their protection against your potential default. In some circumstances they may also enforce your promise to repay and pursue you for the difference between the sale’s proceeds and your unpaid balance. Some lenders will forgive this debt, but yours may not deem it dischargeable.
Furthermore, short sales can only occur if your circumstances make you eligible. To qualify, you will have to prove to your mortgage lender that you are incapable of paying off your loan’s unpaid balance. And you must also prove to them that your home’s value is lower than this balance.
Understanding the consequences
A short sale may provide you immediate relief from burdensome mortgage payments. But it can impact your credit and finances. A short sale can harm your credit score, since it could show up on your report as a settled debt. It may also prevent you from buying another home during a certain timeframe. You may also have other loans on your home aside from your primary mortgage. In this case, you will need approval from any lender you’ve worked with. And you will have to repay these debts, too, which the sale will not cover.
If you plan on selling your home in a short sale, you must consider Arizona’s laws and the potential repercussions you could face. An attorney with real estate experience can help walk you through these and determine if a short sale is the right choice in your circumstances.
