Its all over the media! Foreclosures on the rise AGAIN! How can YOU stop a Foreclosure and get back in control. Is a Short Sale the answer? Possibly..
Selling a home via a short sale is a legitimate method for stopping the foreclosure process, allowing YOU the homeowner to get on with life and without the ding to the credit record. But remember not all short sales are successful in stopping a foreclosure that may already be in the process.
By definition a short sale is literally the sale of a home for less money than is currently owed the lender on the outstanding mortgage being foreclosed on. In other words the home is upside down from a financial aspect. Therefore, the catch is that in order to successfully conduct a short sale, the foreclosing lender has to agree to it, essentially agreeing to accept less money than it is owed on the loan secured by the house.
Lenders are not in the business of owning real estate. They get upset when they have too many properties on their REO (real estate-owned) books instead of out in the market making it a profit through monthly mortgage payments. Plus, the foreclosure process is not free. Every house they foreclose on costs them thousands of dollars. So, in some instances, agreeing to a short sale is in the lenders best interest.
Further more, an empty house does not get any better. Most lenders would rather you be in the home keeping it livable, clean, lawn mowed, and any other ways to help sell the home. Houses do not sell as easy boarded up and winterized. Keep your house Presentable to help your house be marketable and get you out of a stressful situation.
Also, an important aspect most homeowners dont realize when they decide to go the short sale route, is that any amount of the debt that the lender forgives is considered to be taxable income by the Internal Revenue Service. The lender must submit a form to the IRS stating the amount of debt forgiven, so the tax man can be waiting for the homeowner when April 15 rolls around next year if any of the debt was indeed forgiven. Check with your Tax Adviser to see if you are subject to these taxes.
So for homeowners looking at all their options to stop foreclosure and save their home, the first step should be to contact their lender right away to try and negotiate a workout plan to temporarily lower payments, or to refinance to a fixed-rate loan.
After those and all other options have been exhausted, the next step might be attempting to get the lender to agree to a short sale. If so, then before going too far it is advisable to seek the assistance of a real estate professional who is well versed in short sales. Not all real estate brokers or sales agents know how to conduct a short sale or how to work with lenders in negotiating one.
Bottom line: If you want to stop foreclosure, dont be afraid to ask a real estate professional if he or she has any experience working short sales. If not, move on and interview until you find one who has. Possessing a real estate license does not make them an automatic expert in short sales. It calls for extra training not all real estate professionals have.
Do your homework! Contact your Attorney, Tax adviser, your Lender and your Real Estate professional to assist you with your best options. Breath in, breath out..