What are the risks of a short sale for foreclosure avoidance?

Short sales are one of the ways that homeowners in California can attempt to avoid foreclosure, but they come with some risks. In a short sale, the homeowner sells their house for less than they owe on the mortgage. This can look attractive to the homeowner since they don’t have to pay off their entire mortgage balance, but there are a few important risks to be aware of. The first risk is that the homeowner may not be able to successfully complete the sale. This could be because the bank refuses the offer that was made or because the homeowner does not provide all of the necessary paperwork or documentation. Without a successful sale, the homeowner will still be stuck with their full mortgage balance. A second risk is that the lender may require the homeowner to pay back part of the amount that was not covered by the sale. This is known as a deficiency judgment, and it could result in the homeowner having to pay back thousands of dollars even though they still lost the house. Finally, a short sale can have a negative impact on the homeowner’s credit score. Although it is not always the case, a short sale can result in a drop in the homeowner’s credit score, which could make it more difficult and expensive for them to obtain new credit in the future. These are the risks that homeowners in California should be aware of if they are considering a short sale as a way of avoiding foreclosure. It is important to weigh the risks against the potential benefits of the short sale in order to make the best decision possible.

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What are the risks of a short sale for foreclosure avoidance?

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