You have probably heard about short sales and what they can do for you. A short sale is when a house is purchased, usually by an investor, prior to foreclosure. People who go through the short sale procedure can avoid foreclosure that can also lead to bankruptcy. Many people who have found themselves to be in over their heads when it comes to their mortgages are opting for short sales.
If the short sale goes the way as planned, it can be a win-win for all involved. The investor can get the house for a lot less money than the market value and less than the price of the mortgage. They can then make some minor repairs and sell the house, making a small profit.
The homeowner who is in the midst of the foreclosure can find themselves out of the predicament of being foreclosed upon. They can find that they can get out of their mortgage obligation without having to go through a foreclosure that can severely damage their credit. They can walk away from their home and their mortgage without incurring more debt and a possible judgment against them for legal fees. They can get a fresh start.
The bank can also win. It costs banks and lenders a lot of money when it comes to foreclosures. This is part of the reason why so many banks are now in trouble in the United States. Bad loans have come home to roost. The lenders lose money when they foreclose as they have to go through the process of getting the house back from the owner and then selling it. And because the market is so depressed, it can be tough to sell the house. Most of the time, the bank really takes a financial bath when it comes to foreclosures.
So the bank can work out a deal with the investor to sell the house for less money. The bank gets to recoup some of their money and minimizes their loss and the investor gets to get a bargain on a piece of real estate. The home owner gets to walk away from the deal, learns a lesson and then goes back to start from scratch.
If you are a homeowner who is in the midst of a foreclosure, you may consider a short sale. Make sure that the person who you deal with is well versed in the short sale process. Do not pay them any money up front. Do not sign anything without seeing an attorney. Make sure that the short sale investor gets the bank to proceed with the sale without pursuing you for a judgment for legal fees or the amount that is still owed on the mortgage. If it is worked out properly, the short sale can benefit all involved. But only if everyone understands the deal and how it works.
