How to Stop Foreclosure Using a Short Sale
Homeowners who have considered various ways of stopping foreclosure without success should start thinking about selling their homes. At times, the best option to foreclosure is to surrender the property and start planning for future life, especially when it would be too costly to find another way of saving the home. However, even selling the home outright might not be possible, if the amount owed is more than the home can be sold for. In such a case, a short sale could be the best option.
The most common way of selling a home is by hiring the services of a local realtor who understands the short sale process. Homeowners could also list the property on their own. Whichever way, the commissions should be kept very low so as to allow for a favorable selling price so that the borrower can retain much of the proceeds and use it for paying the mortgage. Selling the home and ending up with a small amount of equity is wiser than listing the home for a high price, not being able to sell and eventually having the property sold at a foreclosure auction. In such a situation, borrowers normally end up with nothing.
If the borrower opts to sell their home, the mortgage company might allow them some additional time to find a short sale buyer. It is vital to inform the lender once every other alternative has been exhausted. This way, the bank can hold off legal proceedings and delay any sheriff sale. Mortgage companies are interested in having the loan paid in full. Therefore, it is in their best interest to allow additional time for selling a property in the real estate market.
Quite often, foreclosed homes don’t have enough time to remain on the market for long periods with an asking price which is close to the home’s market value. This is the main reason why lenders will accept a short sale in most situations. A short sale refers to an agreement where the mortgage company agrees to take less than the amount owed on the loan. Usually, short sales are approved if the home’s value has declined and there’s little chance the sellers will be able to get a buyer willing to pay more than the market value. In situations where the loan amount is lower than the home’s value, banks might still consider a short sale since there is a likelihood of them losing more money if the home has to be auctioned.
Homeowners who opt for a short sale need to realize that they are likely to end up with no earnings from the sale. Besides helping you stop foreclosure and break away from the bank, a short sale offers little benefit. The homeowner will not get any financial benefit besides a few hundred or thousand dollars to cover moving expenses. Furthermore, any debt which the bank forgives is taken as taxable income by IRS. This means the borrower could have an additional tax liability as a result of taking a short sale.
Stephan is a freelance writer, who often writes about Avoid Foreclosure and home foreclosure.
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