How Short Sales Can Help

By Doherty • February 5th, 2011
Foreclosure signs, Mortgage crisis,

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What is a short sale?  According to Golden Empire Mortgage short sales are when an investor buys your home before you actually go into foreclosure.  The way that this works is a notice is sent out when a house is going into foreclosure.  The lender has to make a public notice.  This is called a Lis Pendens notice.  When this notice is issued, it is available to anyone who wants to see it.  Anything recorded against property is public knowledge and this notice is a recorded instrument.

Investors will take a look at the notice and see how much is owed on the house. They will do a comparison and see the value of the home by comparing it to the selling price of homes in the area.  If the investor feels that the home is worth the money, he or she may decide to try to do the short sale.

The first thing the investor does is to approach the home owner with a contract for the sale of the home.  The sale of the home should cover the mortgage amount due.  It will be less than the market value of the property.  Many people who are going into foreclosure want to just get out of the mess that they are in.  A foreclosure on your credit history is a big black mark. It can destroy your credit history for 7 years.  Most people want to avoid foreclosure if at all possible.

In some cases, the investor will offer less than the mortgage amount due.  In this case, the investor will offer to work with the bank to get them to reduce the loan amount.  Foreclosures cost the banks money.  In states where there are judicial foreclosures, such as Florida, Illinois and others, the bank has to go through the court system and get a court order to take the home.  They then have to sell the home.  This can be very costly for the bank, not to mention time consuming. And because they are getting foreclosed on, most people are not eager to look after their homes.  In many cases, the foreclosed home will be a mess when the bank finally takes hold of it. This can be more than 6 months after proceedings.

The short sale investor will work with the bank and get them to reduce the mortgage amount, getting the original owner off the hook and allowing them to go on with their lives.  They will normally leave the home without any of their equity, but they will not have to worry about a judgment or a foreclosure on their record. They can get a fresh start.

If you are in the midst of a foreclosure, a short sale may be the option for you. If you decide to go through with the short sale, make sure that the investor is qualified and will guarantee that the bank will not pursue you for a judgment for any funds due. You may be able to sell your house to a short sale investor and get out of your mortgage obligation without incurring a black mark on your credit history.  So contact Golden Empire Mortgage to clearly understand your options.

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