The Short Sale Is An Effective and Attractive Alternative to Foreclosure!
The number of foreclosures in the United States is at a record high and people are losing their homes. While the government has tried to help existing homeowners, their help is conditional and many people facing hardship will not be assisted at all by their selective programs. So, if a debtor can not pay their loan payments, they are first faced with huge late fees and interest rates. They are eventually looking at foreclosure. Foreclosure does not just take their home. It destroys their credit and puts them at an even greater disadvantage in the future. Many times, they are left to their own devices to stop the foreclosure. First, they must exhaust their resources with the bank, refinancing, catching up with past due payments. Sometimes, the money or income just is not there and the bank will not budge. One option that may be possible to stop the foreclosure and even save the debtor's credit, is the short sale.
A short sale occurs when a third party buys a piece of real estate, usually for less than its full value. It is also usually a cash transaction. A short sale tends to be instituted by the debtor to stop foreclosure. It also is usually less than the amount left on the loan on which the debtor has defaulted, which prompted the creditor to initiate a foreclosure. A short sale is clearly beneficial to the debtor because it takes the property and the bulk of the amount owed off of their shoulders. It also avoids foreclosure and leaves them free to invest again in the future.
The lender must agree to the short sale. It is usually in their best interest because it avoids all the time, money and effort that go into a foreclosure. It is not a win-win because the bank is still losing money, but economically it may be the best. By the time a bank goes through all of the steps of foreclosure, including attempts at collection, filings, court costs, notices and the actual sale, they have incurred fees to make the whole debt much larger than the balance was. So, the bank, by agreeing to a short sale, does make out in many ways and incurs less debt. Many times, a bank has its own department, such as a loss mitigation department which approves short sales and does all of the appropriate evaluations. They will often also even consider short sales for homes not yet in default, which could be of even more financial advantage to the bank.
The short sale is always to the benefit of the debtor. Of course, the loss of the property is not optimal. But at the point of foreclosure, usually all other options for salvage or redemption are gone and not viable. So, if remaining on the property is no longer an option, the debtor's main goal should be to save their credit so that in the future they will be able to buy or invest again. Finding another buyer who is willing to cover a good portion of the debt is a great way to avoid foreclosure. Banks are wont to agree and it gets the property and the debt off of everyone's agenda with one fell swoop. Foreclosure is not a good option for anyone. It's time consuming and lengthy. It's expensive and complicated. The rules are very particular and everyone incurs debt beyond what was originally agreed upon. Short sales help to lighten the load all of the parties are carrying and end the whole dispute and situation without affecting the debtor's credit or the creditor's reputation.
Susan Redfield is a real estate agent at BankOwnedProperties.org. Find bank owned properties for sale nationwide.