According to statistics, there were nearly 1,100,000 foreclosure filings in 2015, that’s over 3,000 per day.
While only just over half were completed (575,378) it still led to 327,069 homes being repossessed.
Once you’re close to that position, is there anything you can do to avoid foreclosure?
Options and choices are limited, but you may benefit from a Short Sale.
Here’s what you should know.
Can I avoid foreclosure with a Short Sale?
Unless you count “maybe” as a definitive answer, it isn’t such a simple question to give accurate responses to.
Starting with the basics …
Contrary to what you may think, a Short Sale isn’t a quick sale; it’s described as:
When a homeowner is in financial distress, they can sell their mortgaged property for less than the amount due on the mortgage. All proceeds from the sale go to the lender.
That’s a very short summary of something that can be really complicated – don’t let the name fool you, it isn’t a short process either.
Further, there are two things that will absolutely guarantee your lender saying no to a short sale: If the mortgage isn’t in arrears (you’re just expecting to be) and if you’ve filed for bankruptcy.
In these cases, it is worth notifying your lender that your circumstances have changed, and that it may impact your ability to sustain payments.
Working with your lender
None of this is possible without your lender’s agreement.
You should always try and talk to them first.
Can they help you? Can they change the payment structure? Or even modify the loan agreement?
Most reputable lenders don’t actually want to see you homeless (despite how it feels), many of them will try and help to avoid foreclosure where it’s possible, but be realistic.
A short sale is pretty much on the bottom of the options list – it will still have a drastic impact on your credit report, but less so than a foreclosure.
You should also remember that it’s discretionary; a lender has no legal obligation to agree to a short sale, in some states, the lender must write-off the difference between sale price and mortgage.
That could have an impact when they’re deciding to foreclose or agree to a short sale.
If your lender is agreeable (in principle) to a short sale, then you need to start preparing and planning.
Although you may be feeling that the last thing you need is to spend more money, taking advice from an attorney, tax professional, and real estate agent is vital.
Trying to avoid foreclosure with a short sale is a complicated and drawn-out process. A mistake here is easily made and can have repercussions for a long time to come.
Talk to the decision maker at your lender – customer service representatives aren’t in the position to make those kinds decisions – ask to speak to the loss mitigation department in the first instance.
Remember – if the first decision maker isn’t helpful, you should try ringing again on a different day at a different time.
Gather all the documentation that you’ll need to show recent financial hardship, this could include medical bills, pay stubs, bank statements even a termination notice from your employer.
You should also include a hardship letter – detailing why you have been unable to make payments, but a word of caution:
If the bank doesn’t approve the short sale, they could use the information supplied by you to try and gain money as part of the foreclosure proceedings. Be wary.
Avoid foreclosure for free
There are a number of other strategies that you can use to avoid foreclosure, these include negotiation and a Deed In Lieu of Foreclosure.
However, these strategies are really only an option while things aren’t too bad between you and the lender.
The more time goes on, the larger the arrears, the fewer options you have.
A short sale isn’t for everyone, nor is it available to everyone. You should talk to your lender when trouble rears its head, they are in the best position to advise you in the first instance.
Why would the lender agree?
You may think that the lender will just outright refuse – after all, they’re going to be losing money, and they aren’t in the business to give money away.
However, foreclosure proceedings can be long and time-consuming, which of course, means expensive.
Once the lender realizes that foreclosure is inevitable, they may decide that a short sale is the easiest way forward; less time consuming, cheaper and still getting some sort of return on their money.
You should also remember that a short sale won’t be listed as a foreclosure, meaning that it won’t affect their numbers. It will look good on paper and give the lender a ‘we care’ branding.
Of course, for this to happen, the lender must have a degree of persuasion – they won’t just agree to a short sale under any circumstance.
Make your argument compelling, heartfelt yet truthful. If the lender suspects any hint of dishonesty, you will lose any chance of a reasonable outcome.
- If you’ve received a Notice of Foreclosure, it doesn’t make you a bad person, there are thousands of people in the same situation.
- It isn’t going to go away, you do need to deal with it.
- Communication is your best form of defense.
- Try and head off trouble before it starts.
- We are here to help you through it.
- If there is a co-signature on the mortgage, it is more than likely that they will be held responsible for the shortfall.
Our friendly specialists are available on our toll-free number at 1-800-589-4106 or you can contact us for an unbiased discussion.
We are the go-to company for anyone looking for help with avoiding foreclosure on their home.
We provide information and guidance that can help you to get through this – you don’t have to run from the mailman anymore, we’ll help you find the light at the end of the tunnel.
Call us today for an informal chat.