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What you should know about the short sale process in Arizona

Are you facing foreclosure? Are you not only worried about losing your home but how your credit score might also be affected? Many people in this situation consider a short sale.

-- What is a short sale?

A short sale occurs when a buyer offers a price for your home that is not enough to pay off the seller's loan on the property. The seller owes more on his or her loan than what the property is worth in the current real estate market.

-- Why would a lender agree to a short sale?

It does seem rather odd that a lender would agree to take less than what is due on the loan. However, it can be a good situation for the lender if the homeowner is behind on his or her payments and will likely end up in the foreclosure process soon. There are several expenses that a lender must incur in order to get a home under the Arizona foreclosure laws. A bank can lose anywhere from 20 to 30 percent is they go after a home through the foreclosure process. A short sale is the least expensive option for the lender.

-- How will my credit be affected by a short sale?

Your credit will likely take a severe hit. For example, some credit experts believe your credit score could drop by 100 too 200 points. In some cases, you may be able to negotiate with the lender to avoid having the short sale reported to the credit bureaus.

If you are facing foreclosure, you may want to find out if a short sale is in your better interests. An experienced real estate attorney can help you understand your legal options.

Source: Phoenix Real Estate Corner, "The Short Sale Process In Arizona Explained," accessed May 17, 2016

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