subject: Avoiding Foreclosure via a Short Sale [print this page] Struggling to keep up with mortgage payments has become all too familiarfor millions of Americans. The loans that were made for many of these homeowners heavily favored the lenders, and some were actually designed to completely bury homeowners. When facing foreclosure, a short sale is one of your options. It's not a magic pill that will miraculously take care of all your problems, but it can definitely soften the blow you would otherwise be subject to what foreclosure. The details of your situation, the ability of the real estate agent working on your short sale, and your bank's willingness to accept a short sale are all factors that will determine whether or not a short sale works for you.
Frankly, having to foreclose the last thing the bank wants to do. When the bank has to foreclose, it equates to a loss. Once they foreclose,any necessary repairsor maintenance will be their responsibility. For these reasons, and many more, the bank doesn't want to foreclose; and you don't want them to foreclose. It's in the best interest of both you and the bank to agree to a short sale when foreclosure seems inevitable.
The short sale process isn't easy. Not only can it take months to get an approval from the bank, but they might even be rude to you during the process. What you have to understand is that this is simply business; no special treatment will be given to you regardless of your personal scenario, and neither party will go out of their way for the other. The bank is very interested in not foreclosing and, since your scenario leaves you unable to make your payments, your best bet is to get out of this bad loan and into something more affordable. In such a grim circumstance, it's as close to a win-win scenario as you can get.
Oftentimes there are multiple lien holders involved. You may have taken out two loans to purchase the property, or you may have taken out a home equity line of credit at some point. A short sale requires approval from all lien holders. Sometimes a particular lien holder will choose not to approve the short sale and force foreclosure. That being said, in the past couple years therehave beenso many loans gone bad that most lien holders are willing to approve a short sale. It doesn't make good business sense to try and bully a homeowner of money they don't have. The first lien holder will usually allow a small portion of the sale proceeds to go to the second lien holder to keep them happy.
Usually you'll need to hire a real estate agent to facilitate the short sale. In some casesyou may need alawyer. If you're behind on payments right now you know how intimidating debt collectors can be. If the debt collector represents the second lien holder, they can be even worse. Whether you hire a real estate agent or lawyer, make sure they specialize in short sales.
It's very likely that a short sale is the best option for you if foreclosure is imminent. A short sale will damage your credit, but it may not be as damaging to your credit as foreclosure is. Oftentimes you'll be able to buy yournext home sooner if you do a short sale as opposed to allowing foreclosure.
A short sale will result in a deficiency of debt: the difference between what you owe and what the house sells for. As part of the short sale agreement, in many cases, you can get the lien holder to release you from any further obligation to the debt. Additionally, now more than ever, many state governments are creating anti-deficiency laws to protect homeowners in distress. If you simply allow the foreclosure to happen and not attempt a short sale, you may or may not be subject to a deficiency judgment.
