Short sales vs. foreclosure offers financially strapped homeowners' two very different options. Neither option allows homeowners to keep their home and both affect credit ratings. Short sales can be complicated and require borrowers to locate a qualified buyer quickly. Foreclosure allows borrowers to walk away from their home, but the process is embarrassing and emotionally draining.
Many considerations are involved with
short sales vs. foreclosure. Both options can assist borrowers who can no longer afford their mortgage payments. Homeowners facing foreclosure or contemplating entering into a short sale agreement should consult with a real estate lawyer to determine which option best suits their needs.
Short sales are usually the best financial option for borrowers who are delinquent on their mortgage loan but have not yet fallen into foreclosure. Not all banks offer short sales and those that do require borrowers meet certain criteria and adhere to specific protocol.
With short sales, banks agree to accept less than the borrower owes on their mortgage note. Each mortgage lender handles short sales according to their established protocol. In most instances, short sales are managed through the lender's
loss mitigation department.
Delinquent accounts are assigned to a loss mitigator who will work directly with the homeowner throughout the short sale process. Borrowers are required to undergo a financial audit and must submit documentation such as payroll records, bank and investment statements, tax returns, income and expenses, insurance premiums and property tax records.
Borrowers are generally required to submit a
short sale hardship letter outlining circumstances and events which caused them to become delinquent on their home loan. Loss mitigators prefer handwritten letters that include a timeline of events, concise details and any actions taken to overcome financial hardships.
The majority of mortgage lenders require borrowers to have a buyer in place before granting
short sale approval. Some banks will allow borrowers a few months to list their property through a realtor and locate a buyer. If a buyer is not found within the timeframe, the lender commences with foreclosure action.
Properties which have already entered into foreclosure are not eligible for short sale approval. Homeowners must owe more than the appraised value of their property and cannot own assets which could be used to repay the loan.
Foreclosure begins when banks issue a
Lis Pendens; a legal document which is filed through the local court and delivered to homeowners by a Summons Server. When borrowers are served with a Lis Pendens, they still have the opportunity to save their home from foreclosure. Depending on their financial circumstances, borrowers can apply for a loan modification or attempt to obtain short sale approval.
Loan modifications permanently alter the terms of the
mortgage note. Some banks extend the terms of the note and roll mortgage arrearages to the end of the loan. Other banks require borrowers to cure mortgage arrearages or pay a portion of delinquent amounts before modifying a loan.
When homeowners do not qualify for loan modifications or short sale approval, lenders have no choice but to foreclose on the real estate. Once property is foreclosed it is placed for sale through public auction.
If the property does not sell at auction it is returned to the bank. The bank becomes the owner and can sell the house at a discounted rate and hold the foreclosed homeowner responsible for the difference between the sale price and loan balance.
One solution to avoid being held responsible for mortgage deficiencies is to request a
Deed in Lieu of Foreclosure which releases borrowers from repayment of the deficiency amount.
Real estate investor and short sale specialist, Simon Volkov, offers solutions to borrowers who are facing foreclosure. Simon possesses a solid track record in orchestrating successful short sale transactions. If you need to sell your home quickly to avoid foreclosure or satisfy a short sale agreement visit
www.SimonVolkov.com today.
