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Stop Foreclosure: The Short Sale when Facing Foreclosure
Posted by Eileen Gill on December 17, 2008
If you face foreclosure today, you are among many in the same situation. You are no doubt feeling desperate, helpless and you don’t realize what options are available to you.
Foreclosure causes stress as it threatens your health; you have trouble eating, sleeping and functioning!
The phone rings constantly, and you don’t even have to look at your caller ID to see that it’s your mortgage companyAGAIN! They are relentless! They interrupt your dinner, your family time, and your sleep!
Hundreds of thousands of people are facing foreclosure or are in various stages of foreclosure today. Many are stuck in a mortgage they can no longer afford to pay due to the resetting of the ARM or Adjustable Rate Mortgage. Refinancing is difficult or impossible because of financial hardship and declining real estate values. You cannot be approved to refinance if you owe more than the home is worth in today’s market.
This is a rough situation for anyone to be in. You’re overwhelmed and would like to just relax and go back to the way it was before, when you could come home from work and enjoy your family without the annoying phone calls from your lender.
You do have options and help is available no matter where you are in the foreclosure process. If you feel that you have exhausted all other options; if you feel that you should cut your losses and walk away from this debt and start over, you should consider a short sale.
Your lender might be willing to accept a lower price than what is owed on the home if you want to sell it for what it is worth in today’s market. Your lender is familiar with this and he will have an appraisal or value check done on your home before deciding to agree to a short sale offer.
You can work with a foreclosure specialist who has experience in working with short sales. The short sale negotiator will also perform a market analysis on your home to determine market value. They will help you submit other documentation to your lender to qualify you for the short sale option, including a hardship letter, financial statements, bank statements, pay stubs and other supporting information to show financial hardship and the declining value of your home.
A good short sale negotiator provides a great service to the distressed homeowner and the lender. They help the homeowner by helping them satisfy their lender with a short payoff. In addition, they will ask that the lender provide the homeowner with a document of full satisfaction so they do not come after them for the deficiency. A short sale prevents the foreclosure from proceeding and becoming a part of your credit report, resulting in damage that takes many years to repair.
The lender benefits by cutting their losses and taking what they can get now, rather than incurring the additional legal and financial expenses of foreclosure, while market values continue to plummet. If they wait out the redemption period, which varies from state to state, and evict the homeowners, fix the home to make it marketable, by the time the property sells, chances are good that it will be worth even less and their loss will be greater.
You should only consider a short sale if you feel that you have no other options. If you owe a lot more than your home is worth and you cannot meet your mortgage obligations, maybe it’s time to just walk away and sell the home for whatever you can get your lender to accept. You just lose more each day as you try to cover all the expenses while foreclosure is looming. A short sale saves your credit report from having a foreclosure on it while satisfying the debt to your lender. You also get to put an end to the harassing phone calls and letters from debt collectors while you make a new start.
Eileen,
Great brief explanation of the process leading up to a foreclosure or short sale. Another option to consider before going into a foreclosure or short sale situation is “Loan Modification.” The homeowner would talk directly with his mortgage lender (Loss Mitigation department) when there is a first sign that he will not be able to keep up with his mortgage obligations and try to negotiate a change in terms, percentage rate, or amount for his mortgage note. Also, the Bush administration launched the “HOPE for Homeowners” program in October 2008 to provide mortgage assistance for homeowners at risk of foreclosure. The “HOPE for Homeowners” program would refinance mortgages for borrowers having difficulty making their payments, but can afford a new loan insured by HUD’s Federal Housing Administration (FHA). Follow this link for more info on this program.
http://www.hud.gov/news/release.cfm?content=pr08-150.cfm
What are the fee ranges for foreclosure specialists?
Great post! Most people don’t even know that short sales exist, and I think that is why so many people have just ‘walked away’ from their homes and mortgages. While that isn’t as common up here in the Seattle market, people do just give up, thinking their situation is hopeless.
I think it is really important that people pick an agent that is EXPERIENCED with short sales if they are in that situation. I had the frustrating experience of working with short sale listing agents that have no clue what they are doing, and I have wound up in most cases doing all the work for the buyers and sellers.
If you are out there and thinking of selling your home short, pick the right agent!
Everyone is wanting a deal right now and I think the general public is becoming very knowledgeable on foreclosures and short sales. In Jacksonville, the majority of business is in Short Sales right now.
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