Foreclosure Is Not A Fun Word
The short sale is for those that absolutely need to move and get out from under their debt completely. A loan modification is for those that would really like to remain in their homes but can not do so without assistance.
It is important to remember that banks are not in the business of owning Real Estate in their portfolios and would much rather assist a homeowner than to take ownership of their home. Here is a break down of how both assistance programs work.
Short Sales: A short sale is a legal lender approved solution designed to assist those home owners who are financially strapped to get out from under their mortgage debt.
A short sale is negotiated through the mortgage holder of an owner's home where by the mortgage holder agrees to take less than what home owner owes on the property.
An example of a short sale would be if a home owner owes $500,000 on their current mortgage and their home is only worth $450,000. The lender in this example would agree to take a short fall of $50,000 at closing. In many cases the mortgage holder may completely wipe out the debt and the home owner does not have to repay the 50k.
The home owner benefits in this situation because they get out of a sticky financial mess without going to foreclosure which can seriously damage your credit.
You may be thinking why would a mortgage holder want to allow a short sale? There are a number of reasons, most notably the cost involved for the lender going through a foreclosure proceeding. The mortgage holder when all is said and done can easily spend $40,000-$50,000 going through a foreclosure. This avenue can save the lender money they would otherwise lose. The average loss by a bank is about double when a foreclosure is done instead of a short sale.
Most lenders will work with a short sale option to avoid a costly foreclosure.
When selling your home and you know you are going to be faced with a short sale make sure you choose to work with a good Realtor who has some working knowledge of short sale procedures! A good Real Estate lawyer in your corner who has worked with short sales would also be an important consideration. There are also short sale negotiating companies that work directly with the banks as well. There is a lot that goes into the process of completing a short sale. Having professionals to work with is vital when you are going through a short sale.
If you would like to investigate the short sale process and live in the Metrowest Massachusetts area, I would welcome the opportunity to speak with you. I am well versed in the procedures and have been successfully completing short sale closings.
The above information on Foreclosure ~ Avoiding it Through a Short Sale or Loan Modification was provided
by Bill Gassett, the team leader for the #4 RE/MAX Team in Massachusetts in 2007. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356.