Short sales are gaining traction among lenders because of a new federal incentive. In essence, the government has agreed to absorb a part of the loss that a bank sustains whenever they do a short sale.
"In May, the Treasury Department said it would offer a streamlined framework for short sales and incentive payments of $1,500 to homeowners, $1,000 to loan servicers and $1,000 to second-lien holders," The San Francisco Chronicle reports.
Just 18 months ago, the term "short sale" was not widely known. Today, it's gaining some currency as more and more short sales get done, but it's still a misunderstood concept.
Short sales are when you need to get out of a house and you get the lender to agree to take market value on the sale -- instead of what you actually owe on it. You'll take a hit of about 120 or 130 points on your credit score for doing one.
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