The income in any real estate venture is to be able to sell the home for more than what you paid for it. This would include all amounts that went into fixing things up on the house too. Sometimes this is not the outcome that happens. Real estate investments can vary due to it is solely based on property values. Property values can increase and then drop and decrease. This is not one of the things that we want to think of as a yo-yo. This is our money at stake! If you find yourself in a spot where you have bought a home and the property value has dropped and you now find that you owe more on the property than what it is worth, you know there is just no way you are going to make profit off This venture. It is impossible!
Now I know what you are thinking, What is a short sale? A short sale is where you have a home with a very high mortgage that you are selling for a much lower price than what it would take to pay the mortgage off in full. After the short sale of your home, you will still owe on your mortgage. Whatever amount is left after applying what you sold the home for, is what you will still owe your financial institution. You would not have to pay any property taxes, maintenance fees, upkeep on the home, or any other charges associated with the property as you are not the owner anymore. All of these things would now be the responsibility of the new homeowner. The new homeowner and you are free to do what you want. The home is not in foreclosure and as long as you continue to pay the remaining mortgage balance that you still owe, you will not have any problems in that area.
Regarding the affect this short sale will have on your credit score, I must state again, this can vary per individual circumstance, but here is a scenario of what will happen. If you, the homeowner, does a short sale of your own free will, and pay the remaining balance owed on the mortgage by refinancing that amount through a completely different lender, then no negative impact will affect your credit. In this situation, you have not defaulted on any payments. If you took the road of trying to get a debt settlement offer from your lender on the remaining balance of the mortgage, this would have a negative affect on your credit but could be repaired over time. Now, in a scenario where you have defaulted on your loan and the bank has started the foreclosure process and has taken ownership of your house, they will short sell your home to try to recoup part of what is owed to them. This process will have a very detrimental affect on your credit. This would be a lot more difficult to repair and take a lot more time and effort. This scenario is the one most found with property owners. If there is a way to prevent this from happening, do so.
Keep in mind that each situation is different. If you do find yourself owed more on your mortgage than your home is currently worth and need a way out, go with the short sale option that will be less detrimental to your credit in the long run. Your credit score should be damaged in the process, do not ignore it. It will not just go away! Take the steps to try to repair the damage that has been done. A short sale can cause a drop in your FICO score anywhere from 75 to 125 points. This will be reported on your credit as a "pre-foreclosure in redemption".
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Source by Alyssa Scott