Loan Modification Programs In Minnesota: Foreclosure And Short Sales.

When a short sale is resorted to, in many states

, but not all, banks let the seller off scot-free with no money owing, even though the proceeds from the short sale does not quite cover the total amount of the mortgage loan owing. This shortfall is called a deficiency judgement.

A bank that holds out for a normal foreclosure is likely to lose more money that way, some believe as much as over 40%, while a short sale can cost the bank 20% or less. This is the major difference between a short sale and a foreclosure. A big advantage to both seller and bank in a short sale is that you, the seller, stay in the house until it is sold and the bank is not left with a derelict, empty house on its hands. When this happens the house tends to go for a much lower price. The potential buyers know that they have to power to beat the price down. There are also risks of both vandalism and personal damage lawsuits if vagrants or children occupy or play in an empty house.

The shortsale should not affect your credit report for longer than five to seven years, and in some cases a lot less. It has even occurred that people successfully applied for a new mortgage after only a year or two and were accepted. A lot depends on your current circumstances when you apply. For instance, you may now have good, steady employment, whereas when you were forced to apply for a short sale before, you had been laid off and were without work. It is vital for the economy of the state that buying and selling of properties continue and that the bottom doesnt drop out of the market. Interest rates have lowered and prices are moderate. It is, in fact possible for people to acquire homes and keep them.

If you do not reside in Minnesota, things can be very different. Even if your credit is rehabilitated and squeaky clean, your previous lender has a right to come after you with the deficiency judgement and try to reclaim the money they lost with the short sale of your house! These extra expenses include the shortfall on the mortgage value of the house, interest, attorneys fees, insurance, and any other costs they incurred. A judgement remains enforceable, should the bank wish to pursue it, for as long as the statute of limitations exists for it. The statute of limitations is, in some states as little as 5 years and in others as much as 20 years!

The good news for you, if you live in Minnesota, is that this does not apply in your state. Minnesota is one of the thirteen non-recourse states in the United States. In this state you have nothing to lose and everything to gain by applying for a short sale in preference to foreclosure.

If you are able to get really good foreclosure avoidance counselling, you may be able, with the right help and advice, be able to save your home. But if this isnt possible, the next best thing is to try and sell your property yourself. If you are unsuccessful in finding a buyer for an amount that covers your expenses and gives you a fair market price, then the choice of going for a short sale is not at all a bad one.

by: Lance Peters

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