The real estate boom is bust in much of the nation: high real estate inventories, stagnant sales, dropping prices, and fewer buyers in the market due to higher costs of living and tighter mortgage lending. Your home has been on the market awhile, but there are no buyers willing to pay what you owe on your mortgage. You are upside down in your mortgage and approaching foreclosure. How can you avoid foreclosure?
Real Estate Short Sales
Short sales in real estate occur when the bank holding your mortgage note agrees to accept proceeds from a sale that are insufficient to cover the owed amount. Even if you find a buyer willing to pay what you purchased for your home, you may still find yourself needing approval for a short sale.
High commissions of real estate agents may leave your settlement funds short. You might have overextended yourself borrowing against your home equity line of credit. Whatever your circumstances, you need a solution. Bank short sale approval can be difficult to obtain and the steps required depend on whether you can stop foreclosure.
When Payments Aren’t Late
You’re working overtime and haven’t missed a mortgage payment, but your personal debt increases every month. You try to call your lender to discuss a short sale based on a realtor's opinion that you can’t sell your home for what you owe given current market conditions. Unfortunately some lenders will not refer you to their short sale help department until you are at least two months late.
Home for Sale
If you have been trying to sell your home at or below a break-even price for longer than average market time in your area, present this information to your bank lender along with a realtor’s comparative market analysis supporting a lower price. Provide financial documentation supporting your home’s current market value, market conditions, and inability to continue paying under current loan terms.
Your lender may agree to marketing at a price that will not provide sufficient proceeds. Short sales are tricky. There are realtors that specialize in mortgage short sales and you might consult a real estate attorney. Your lender’s short sale department will have specific criteria to guide you.
Low Purchase Offer
An interested buyer wants to write an offer, but the settlement proceeds don’t cover closing costs. You will need to write a substantial check to your bank at closing. Losing money is not enough cause to qualify for a short sale. Lenders expect you to pay. When you have no available financial resources such as savings or assets to borrow against, your bank may accept a short sale with no out-of-pocket costs.
Banks would rather negotiate a short sale than foreclose, especially if foreclosure rates and home inventories are high. When you present a purchase and sale offer and your inability to pay is crystal clear, lenders are more willing to settle for less. It becomes a simple calculation of the estimated costs of foreclosure versus the loss from a short sale. Be sure your lender reviews the terms and gives written approval before signing off on a contract.
Already in Foreclosure
Foreclosure is a process that takes substantial time. In early stages, lender communication and cooperation are still possible. Short sale of property is possible late in foreclosure, but requires more legal wrangling that may require a real estate law professional. Your credit will still be damaged by a short sale, but not as severely as recorded foreclosure. Short selling your home may provide a fresh start.
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