To really understand the options, let’s take a quick review. A short sale is when a homeowner owes more to the bank then the home is worth. The bank most agree to take less, or be “shorted”, on the loan in order for the home to be sold. The banks will do this if they feel that a.) the homeowner will let the home foreclose and b.) the bank feels the short will net them more money. The foreclosure process takes time and can be costly.
Allrighty, then. Most people who enter into a short sale have severe financial hardship- lost jobs, lost spouse, bad loans. These homeowners are not in a position to buy now or or in the near future. They will likely rent, while they rebuild their lives and credit. In some cases they can buy a home in as little as two years.
However, increasingly, we are seeing “strategic defaults”. This is a new breed of homeowner that chooses a short sale, but not out of desperate financial need. Many are struggling, but are still able to make their payments. They need to move on with their lives and can’t wait the years it might take to “recover” their home’s value.
These are the people who wonder if they can sell short and buy, right away. Frankly, the answer is , “No”. The banks will want to see a two year track record of financial responsibility before they will lend money. A homeowner who chooses to sell short must bear the consequences.
Here are the exceptions.
- Title is in one partner’s name and the other partner can qualify for a new loan.
- A hard money lender might lend, but it will be expensive
- A seller carries the loan
- The bank of Mom and Dad carries the loan