SHORT SALE VERSUS FORECLOSURE

There are a large number of homeowners who have been led to think that the perfect way to avoid foreclosure and walk free from a mortgage without owing a dime is simply by using a short sale. Much of this type of thinking is gaining traction simply because of a lot of confusion that has occurred when it comes to strategies used in real estate. This may be true in part; however the short sales process is not as simple as some people may think.

Short selling is an option some homeowners use when the bank, credit union or other type of mortgage lender they have borrowed from provides them with the option of selling their home to a third party (generally the lender) at a price that is much lower than what they actually still owe on the note of their mortgage. The short sales process is one that is often used by homeowners who are trying to avoid getting caught up in a foreclosure. Thus, receiving approval from the lender to short sale allows them the opportunity to sell their property at a significantly lower rate. It is also important to compare short sales and foreclosures to ensure you are making the right decision.

To most people, it sounds rather strange for any type of lender to be willing to accept a lower amount from homeowners than what they truly owe on their home. There is more than just one reason why a bank chooses to accept short sales. The key reason is, simply put, that a short sale costs them much less than what a home foreclosure would. The expense banks already have to consider from foreclosures is astronomical. They will also be able to supply you with information in regards to benefits received from short sales. However, when they provide homeowners with the option of short selling, they are then able to recover at least a partial amount of what they would otherwise completely end up losing. When a bank has several mortgages that are non-performing, the Federal Reserve will often lower the amounts or even suspend funds they provide to these lenders.

In these difficult economic times you may find that it’s difficult to pay your loan in a timely manner. In the worst case you will feel humiliation when you receive a notice from your lender forcing you to move out of your home and they may not even give you much time. That doesn’t sound any good to me so what can you do to avoid such a scenario? First it’s important to understand that a foreclosure has many consequences in addition to losing your home. Your credit rating will suffer for as many as 7 years causing you to pay high interest rates and difficulty financing another home in the future. Future lenders will know you lost a home previously to a foreclosure so they may think twice about working with you.

So what can you do to avoid all of these negative consequences? A Short Sale. This is a great procedure which allows you to sell your home below the market value. Their are many stipulations involved and you always must seek permission form your lender to sell in a short sale. Your lender has final word. When opting for the short sale your credit will suffer BUT not nearly as bad as it would you let the bank foreclose. Short Sale is the proactive choice.

Since the short sale process can be difficult its always best to hire a short sale specialist to assist you with all of the paperwork. You must keep in mind that the person your hire to help you will be dealing with things you may not totally understand to trust is important. If they miss a step or do not get back with the bank in a timely manner then that could set back your process considerably.