Are you confused about whether a short sale or foreclosure is better? If so, you're not alone. As people across the country find themselves unable to keep up with their mortgage payments, many are looking into short sale options. Bank foreclosures and the housing market is the topic on the mind of most now. People are still trying to keep their houses but banks are not working with them on modifications.
Many people are turning to things like the "short sale" to avoid foreclosure. Simply put, a short sale in real estate refers to a sale that falls "short" of a loan balance due. When sold this way, the bank (or other lending institution) agrees to allow the sale of their security (the property) for an amount that is less than owed to them.
The short sale process is almost always better than foreclosure for a number of reasons. There are many reasons why homeowners may do this, one of the biggest is an acknowledgement of the decline in the value of the property due to economic conditions. Banks realize that many homes are worth less than the balance of the loan, and they have been attempting to work with home owners to sell their homes and pay off their mortgages.
Perry Knox, an auctioneer with Mark Volk Realty & Auction Company said, "During these current economic challenges and the implosion of the Real Estate Market, Lenders are more often accepting Short Sale Options now than they were just 3 years ago. If a lender agrees to accept less than the amount owed on a mortgage that does not necessarily guarantee the difference will be forgiven by the lender and this should be negotiated during the Short Sale Process." In California if the loan was used as purchase money they can not put a deficiency judgement against you.
According to Knox, the short sale process is almost always better than foreclosure for a number of reasons. For example, the lender may agree to "write-off" the short fall on the mortgage and the homeowner will not be required to pay that back. Even in that case, there will most likely be a "write-off" on their credit report (which is still better than a foreclosure and possible subsequent bankruptcy, according to Knox and others.)
A short sale may prevent bankruptcy, which could enable the homeowner to possibly re-purchase a home and secure a mortgage without the 3 year delay associated with a foreclosure. It makes sense to see what your options are before making a decision.
To be eligible for a short sale, the bank wants to see a loss of income. The bank also wants to see if the homeowner to write a letter of hardship.
According to Knox, "A homeowner in this position that does not see the ability to bring the mortgage current and is out of options with the lender should contact a broker right away and have them do a Broker's Price Opinion (BPO) on what the current market value of the property is. If upon signing of a listing agreement and a preliminary acceptance of a BPO by the Lending Institution, you may have just gained a little time before a foreclosure. Typically a Lender will delay Forclosure if they know that there is a Broker out there trying to sell the property, while working with a cooperative seller, for a premiliminarily approved sale amount."
When making the final decision on whether a short sale is the better option, homeowners should take all this information to heart and work with someone who knows the entire process and has been through it before.
One of the best pieces of advice I could offer a homeowner that has begun a Short Sale Process with a Broker/Agent is to work with that Broker/Agent carefully and properly prepare your home for showings and be timely in producing required documents as they become necessary for the Lender, Just because the Short Sale Process is accepted does not mean Foreclosure may not happen. The Broker/Agent has only a limited time period to gain an Offer to Purchase from a prospective Buyer.
If the property continues to deteriorate and does not show well, a prospective buyer is less likely to make an offer and foreclosure becomes more of a reality. By acting within the timeframe, many Hoosiers are finding an alternative to foreclosure that works for them.
No comments:
Post a Comment