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How to Avoid Foreclosure


SHORT SALES

 

Among the many pitfalls that come with foreclosure, is the severe toll it takes on your credit score.  It has been said that an individual who succumbs to foreclosure witnesses a potential drop of a few hundred points on their credit report.  This severe drop in credit can have devastating and lasting effects for years to come.  These effects make attempting to purchase or even rent another home a real problem.

One way to escape a foreclosure setback is a process known as a Short Sale.

A short sale can be initiated once your lender determines you are no longer able to keep up with your mortgage payments.  The bank or lender can then agree to sell your home to an outside party for less than what is owed on the pre-existing mortgage.

We are finding that short sales are happening more often than ever, most likely due to the increasingly tough economic environment.  A short sale verdict is subject to your specific bank or lender.  However, they usually base their decision on the severity of the individual’s predicament and the likelihood of mortgage payments falling behind.  Some typical reasons for getting an approval for a short sale would be: job loss or relocation, reduced income, illness, divorce/separation, and incarceration, among others.  While this might sound overwhelming, our experienced loss mitigation attorney will walk you through the process and answer any questions you may have.

 


 

Short Sale FAQ’s

 

Q: How do I know if a short sale will work for me?

A: There is a litany of reasons a short sale might work for you.  The bottom line is if your situation creates a high probability that you won’t be able to make your mortgage payments, than a bank/lender might want to avoid going through with a foreclosure process and risk being stuck with the property.  Remember, the banks are not a real estate company.  They don’t want to hold onto houses.  The fact is the banks lose money on short sales and foreclosures.  The difference is they can lose more money in a foreclosure.

 

Q: What costs do I incur selling my house in a short sale?

A: As the seller, you don’t pay anything.  The bank/lender incurs the costs of the short sale.  This includes sales costs, commissions, title and escrow fees.  A lender will usually pay for repairs.  This depends on the size of the repairs needed and the specific lender.

 

Q: What if my home needs a lot of repairs?

A: A bank has two choices; short sale or foreclose.  These options are both lose-lose for the bank/lender.  In homes that need repairs, a short sale can be the lesser of two evils because it’s a way for the bank to cut their loses.  A short sale is less of a headache for a bank/lender.  They don’t have to worry about finding a buyer or putting the property on the shelf and risk making no money.  A foreclosure on a house that needs a lot of work is much more risky to the banks, and banks aren’t big risk takers.

 

Q: What do lenders feel are good reasons for a short sale?

A: There is no black and white answer to this question.  Lenders look for two things when they determine if they should proceed with a short sale

  • The specific issue the individual is having that is preventing them from paying their mortgage
  • The probability that the individual will likely fall behind on payments to their loan

Here are some common reasons that lenders deem acceptable for a short sale:

  • Job loss
  • Job relocation
  • Business shut down/closed
  • Divorce/separation
  • Illness
  • Incarceration
  • Etc….

 

Q: How do I start the short sale process?

A: The answer is simple.  If you want to see if a short sale is right for you or even if you just have a few questions, just give us a call at (631) 388-6059!  We’ll walk you through the do’s and don’ts and answer any questions you may have.