Prevent Foreclosures

Posts Tagged ‘real estate short sale’

One of the most popular way to prevent foreclosure is to do a short sale. A real estate short sale is becoming more and more common as more and more homeowners are facing foreclosure. A real estate short sale is not to be confused with a stock short sale.

How does a short sale work?

With a short sale you may have the option to sell your home for less than the amount owed on your mortgage. By doing a short sale, you may be released from your obligation to pay back your primary mortgage under its original terms. However, don't rest assured because not all homeowners who have successfully done a short sale are released from their original mortgage obligations.

Some mortgage companies may accept the proceeds of the foreclosure sale as payment in full. Your mortgage company will have to approve the short sale proposal. If you can get your mortgage company to accept the short sale of your home, then you might want to get them to state in writing if they would release you of your original mortgage obligation. A short sale can help you avoid a foreclosure sale and may be considered even if the foreclosure process has started.

Benefits of a Short Sale

There are many benefits to a short sale which is why it is a very popular way to prevent and avoid foreclosure. As the homeowner, you:

• Avoid a foreclosure sale — in some cases the foreclosure sale may be postponed once a written, signed offer is received and approved by your mortgage company
• Can live in your home until the new owner closes, giving you time to make other living arrangements
• May be released from your obligation to repay your mortgage balance

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Sometimes, you can avoid having to go through the foreclosure process by doing a real estate short sale. Real estate short sales are commonly associated with upside down mortgages. When a homeowner is upside down, which means he or she owes more than his or her home is worth, then it does not make much sense to sell the home because the proceed from the sale will not be enough to pay the bank off. If the homeowner is only a little upside down, he or she may decide to fork up the difference out of pocket. However, most of the time, upside down homeowners do not have the money to pay up the differences. This is why a short sale is necessary.

When the bank feels that there is no way the homeowner could pay what he/she owes in full, the bank may decide that some payment is better than no payment at all. The bank may also decide that it is more profitable to go ahead and accept a short sale proposal rather than proceed with the foreclosure process. After all, in this buyers market, the bank is not likely to be able to sell a home for a large amount of money.

What are the benefits of a real estate short sale?

The main benefit of doing a short sale for a homeowners is to be able to get out of the mortgage obligation without having to pay it in full. If the homeowner is in foreclosure, the short sale will stop the foreclosure. That means, you should not have foreclosure on your credit record. However, sometimes, the bank has sent  your account to a collection agency or has reported foreclosure to the credit bureaus and then do not send them updates after the account has been settled under a short sale agreement. If this is the case for you, then it is up to you to make sure that the bank send proper notifications to credit bureaus and collection agencies or you can dispute with the credit bureaus yourself.

The effects of short sale on your credit

Unlike a foreclosure, having a short sale on your credit report is not as damaging but it is not totally good either. Usually, you will be able to borrow money sooner with a short sale on your credit record than a foreclosure or bankruptcy. So, if a short sale is an option for you, then credit-wise, it is a good option for you to take. However, you need to also consider disadvantages of doing a short sale too. With a short sale on your credit record, the interest rate you are going to get will still be high but not as high as you would get with a foreclosure or bankruptcy on it.

If you have an upside down mortgage, you may have heard of a short sale. Below explains what is a definition of short sale foreclosure.

Definition of short sale foreclosure

When you owe the mortgage company more than your home is worth. (You can find out what your home is worth for free using the link on the right hand side.) Then even if you sell your home, you will not have enough money to pay off your mortgage balance. In this case, there is a solution and it
is called short sale or real estate short sale or foreclosure short sale.

What happens in a short sale foreclosure?

When a homeowner realizes that he or she is upside down on his or her mortgage, he or she can find a realtor or a real estate investor to help him/her with a short sale.

As your mortgage company is getting to foreclose on your home, you can have a real estate investor send them a short sale proposal letter. In the letter, the real estate investor will express his or her interest in buying your home to avoid foreclosure. By buying your home, he/she will save everyone from the headache of foreclosure.

Since you owe more than your home is worth, the real estate investor or realtor will convince the bank to accept less than the amount you owe for the property. For example, if your mortgage balance is $200,000 and your home is now worth only $150,000, you are "upside down" $50,000. If you contact the bank yourself and ask them to take $150,000 they are unlikely to listen.

However if you prove to them of your hardship, provide them with a willing buyer who is the one doing the short sale, and convince them that if they did not accept the short sale then they will have to file for foreclosure and sell your home in an auction which could be much less than the short sale price offered. If the short sale is done right and the real estate investor is experienced at doing short sale, then the bank is likely to accept less money than the actual amount that you owe.

What's the best that can happen in a Short Sale?

In a successful short sale case, you walk away free and clear, the real estate investor buys the property and the bank settles. A realtor can usually find you a buyer who is willing to do a short sale with the bank.