It may seem hard to believe, but it has been seven years since the financial crisis of 2007. The repercussions from that crisis were felt in various industries, including the housing market, and long-lasting. Indeed, the economic recovery has been years in the coming.
Nevertheless, the seven-year marker is significant because many homeowners who lost their properties to foreclosure are now able to start repairing their credit. Specifically, data collected by a real estate analyst firm indicates that almost a half million Americans are now past the seven-year waiting period for new mortgage applications that is imposed after an individual goes through a foreclosure.Â
Although lenders may have come out of the crisis with a different perspective on subprime mortgages, other types of mortgage financing arrangements from that era actually have emerged with their reputations intact. A short sale may be such an example.
In a short sale, the lender agrees to a sale price that is short the full amount owed on the mortgage. When a buyer is in default on his or her mortgage payments and wants to move into a less expensive living arrangement, a short sale may be a way to lessen the negative impact to oneâs credit record that usually comes with a foreclosure.
However, a short sale cannot occur unless the mortgage lender gives its approval. Why would a lender agree to an amount less than the full balance on a mortgage? One reason might be to avoid the time and costs associated with foreclosing on a property and reselling it.
Source: Boston Hearld, âUS new home sales jump 11.6 percent in December,â Jan. 27, 2015
Source: Freddie Mac, âBuying a Short Sale Propertyâ