subject: Avoid Foreclosure - Save Your Credit - Lender pays all costs! [print this page] Avoid Foreclosure - The Short Sale Solution
So, what exactly is a short sale? Put simply, a short sale
is the sale of a home in which the amount owed to the
lender(s) is more than the amount that the home can be sold
for. Instead of the home owner having to bring in money to
complete the sale, the sale is completed through negotiations
with the existing lender(s) and the lender(s) agree to accept
less than the full amount owed to satisfy the debt and allow it
to be paid off short.
Put even more simply, a short sale is a real estate
transaction that requires an approval from the lender - period.
It's not some complicated legal process that requires paying an
attorney. As a matter of fact, watch out for that trick!!
Now don't get me wrong. Short sales are most definitely a
different animal than a regular real estate transaction because
once you stop making your mortgage payments, the clock
starts ticking and the hangman starts preparing his noose.
You'll get one shot to do a successful short sale. If your
agent is inexperienced at short sales, makes mistakes, gives
up, slacks off, drops the ball, or simply doesn't know how to
negotiate with banks, you'll wind up being foreclosed on and
believe me, you do not want to go through a foreclosure.
A foreclosure will devastate your credit. Your credit score
can be lowered by as much as 300-400 points (or more) and
you'll be hounded day and night by your lender. Even worse,
you'll have difficulty getting credit cards, auto loans or even
renting a home or an apartment for the next 7 years.
Your home will be repossessed by the bank and the bank
will sell your home, either at auction, or more likely through a
real estate agent, with a large sign out front that says "Bank
Foreclosure".
Here's something important you need to know about
short sales, depending on whether the loan on your home is a
"purchase money" loan or whether you did a "cash out"
refinance after your purchase, you either have a "non
recourse" or a "recourse" loan. This makes a BIG difference as
to whether or not your lender can go after you to repay your
debt, even after your home has been foreclosed on.
A non-recourse loan is a loan agreement under which the
collateral securing a loan is the ultimate source of repayment,
and the lender cannot hold the borrower personally liable in the
event of a default. The lender can seize (and sell) the collateral
but cannot seize non-pledged asset or property.
A recourse loan is a loan agreement under which a borrower gives an undertaking to repay a debt even if the funded asset (acquired with the loan proceeds) cannot be liquidated to cover the loan amount. In case
of a default, the lender can seize and sell the funded asset as
well as the borrower's un-pledged assets or properties.
That recourse loan sounds scary huh? They can be. The
great news is, I can help you either way but the steps are
different. Now, if you want to see really scary, just ask the next
real estate agent you meet claiming to be a short sale expert if
he or she can explain the difference between the two.
So, I applaud you now for doing your home work and not
simply trusting this process to the first of many typical real
estate agents who are likely to come along promising help.
While I'm at it, you should also be wary of the many
unscrupulous companies operating now that actually
encourage you to go through foreclosure so you can live in
your home a few more months without paying your mortgage.
These companies prey on people who are vulnerable and
unaware of the foreclosure and mortgage laws.
They even charge you a hefty fee for the privilege of
getting foreclosed on! This is financial suicide, and it is totally
unnecessary because...
Your lender does not want to foreclose on your home.
It's true. They would much rather have you stay in your
home and continue making your payments, or have you sell it
and get it off their books, even if it requires them taking a
financial loss. Remember, banks are in the lending business,
not the real estate business, which brings me to my next
point: It makes absolutely zero difference whether your lender is
Indymac, Wells Fargo, Chase, Countrywide / Bank of America,
Downey Savings, CITI, Chevy Chase, Washington Mutual,
Wachovia, World Savings, First Franklin, Flagstar, GMAC,
