Guide to Selling a Short Sale in Alberta

Some people find that they cannot keep up with their home mortgage payments. Rather than head into foreclosure, they want to take the route of selling their property as a short sale. Sellers may pursue this option, no matter the state of the market, when they find they are underwater on a mortgage or may be in the initial stages of the foreclosure process.

Short sales may not be common to a specific area. Short sales were prevalent when there many foreclosures in the Calgary market, but short sales do arise when there are few foreclosures. However, this may not be a choice for everyone faced with foreclosure in Alberta, as the final decision is made by a cooperating lender.

Short sales can benefit homeowners, the lender and the buyer. Learn more about short sales and why homeowners are choosing to mitigate foreclosure with a short sale in Alberta.

For informational purposes only. Always consult with an attorney or licensed mortgage professional before proceeding with any real estate transaction.

Choosing a Short Sale

There are many reasons why individuals may not be able to continue making regular mortgage payments. From unforeseen medical bills, divorce or job loss, changing circumstances may force homeowners to make difficult choices, including going into arrears with home mortgage payments to a lender.

Homeowners can decide on a short sale to avoid foreclosure. There may be a significant balance left on the mortgage and yet a lender will accept an amount that is less than what is currently owed on the loan, permitted a short sale. This is good news for the homeowner. Foreclosure comes with negative consequences, making it difficult to get a new home loan and will impact credit scores, even making renting an issue. One's credit score may be lowered up 300 points with foreclosure, while some who decide to sell a home as a short sale may only have 100 points trimmed from their score.

Short sales allow the seller and the lender to quickly move on and has less of an impact on the seller, as it will be reported only as a pre-foreclosure status in a credit report. Sellers may be approved for a new home application in as little as 2 years after the process. However, much depends on the lender or bank. Therefore, sellers may need to shop around for a mortgage loan in the future.

Getting Permission for a Short Sale

Sellers need to be approved to sell their home as a short sale in Alberta. This requires sellers to gather and provide evidence that it is not possible to pay mortgage payments to their lending institution. It is also recommended that a seller speaks to their lender so that the lender can assess the property and whether it's preferable to allow for a short sale of the property. Sellers may want to partner with a real estate attorney experienced with such issues to better understand the process and what to expect from a lender.

A lender may agree to a short sale when it looks like they will not get the entire value of a home from a sale. Foreclosure is a time-consuming and expensive process. Lenders will agree to a short sale to recoup part of the loan amount, rather than go through the foreclosure process.

Potential Complications with a Short Sale

It can become difficult for some to go through with the short sale process when they have tenants living in a home. Homeowners with tenants on a month-to-month contract are in luck as they only need to provide them with 90 days to vacate the property. Individuals with tenants on a year-long lease may want to wait until the end of the contract to initiate the sale of a home. Tenants cannot be forcibly evicted and there are laws that support the rights of renters.

A Short Sale as a Practical Option

It can take time for a lending institution to assess the situation and a homeowner may need to wait a few weeks to a month or two to get a response. Homeowners have to show patience during this process. However, there are advantages for them if they are allowed to sell their home as a short sale, rather than go through the foreclosure process.

It is easier for a homeowner to move on and rebuild their credit after a short sale. Lenders get to recover some part of their loan in a relatively short timeframe with a short sale. Westmount new home buyers of a short sale often get a deal on a property which is priced lower than similar comps in the area. A short sale can pay off for the homeowner and allow an individual to cut their losses with fewer financial consequences.

For informational purposes only. Always consult with a licensed mortgage professional before proceeding with any real estate transaction.