Understanding Illinois Short Sales
What is a Short Sale in Illinois
A short sale in Illinois is not what it sounds like. The term "short" does not mean it is a sale that will be quick. The word "short" in the context of a short sale on a real estate property means that the homeowner owes more on their property than the property can net in the current housing market and conditions. In other words, "short" refers to a homeowner being short, having less, on the ability to pay the lender, bank, or entity on which they owe money.
Example of an Illinois Short Sale
Here is an example. A homeowner owes $280,000 to their lender on their home. The current market conditions dictate the house is only worth $240,000. In this case, the homeowner is short $40,000 plus any cost to sell and any penalties if there are late payments, fines, or attorney fees in a situation where they may have missed payments.
A short sale would occur if your lienholder, typically your bank, agrees to release the lien on the property and allow you to transfer ownership for less than the total amount you owed.
A short sale in Illinois doesn't automatically mean you are forgiven of what you owe your lienholder or, in some cases, multiple lienholders. A short sale does allow you to negotiate for the forgiveness of the unpaid amount that you originally owed, something that you won't have a chance to do in a judicial foreclosure.
There are Other Options for Some Homeowners
It is important to note that just because a homeowner has missed payments and cannot pay the current monthly mortgage, this doesn't necessarily mean a short sale is necessary. A homeowner may have enough equity to avoid foreclosure and sell their property as a traditional sale. There also may be other options a homeowner may have, depending on their circumstances. If you are trying to figure out your best choice, contact me at (815) 301-7007, and I can help assess your situation and give you direction. No cost, no-obligation, or commitment; I want to assist you in making the most informed decision.
What are the Benefits of a Short Sale
In the interest of honesty and transparency, short sales are not ideal, but they are often the only option for some homeowners. The most significant concern homeowners have asked me regarding foreclosure, or short sales are how that will affect their financial situation.
Unfortunately, that is not so easy to answer; it is specific to the particular case. The loan type, the lender, the current market conditions, the number of liens or third parties involved are all factors that will affect the outcome.
Credit, liability for the forgivable debt from the lien holder(s), and the tax liability that may be applicable.
One of the reasons for a short sale is to remove these concerns. In a foreclosure, some or all of these concerns will be a reality. In a short sale, it allows you to leverage your property as a way to mitigate the negative consequences that may occur in foreclosure if you have the correct assistance.