A foreclosure short sale is a realistic option in some cases. Indeed, despite popular belief, banks do not want to foreclose on your home. They want you to repay the money you borrowed and they want to continue charging you interest. It is how they make their profits.
When you signed your mortgage contract, you promised you would repay the bank’s money along with the resultant interest charges due.
If your financial situation has changed since you applied for your loan and you can no longer meet your repayment obligations, then unless you have made other arrangements to catch up any past due payments, the banks will begin to take steps to foreclose on your home in order to recoup their money.
One way for them to recover all or part of the money you owe them is to accept a foreclosure short sale.
Foreclosures cost banks and lenders a lot more money than it makes them, so if you present a bank with a viable option to recoup some of their money without the attendant costs associated with foreclosure, such as a foreclosure short sale, then they are likely to listen to your plan. It is for this reason that your lender may be willing to accept a short sale process.
Short sale definition
Here is how to define short sale : The term short sale simply means you know you will be selling your home for less money than you still owe to the bank. In a foreclosure short sale, the bank or lender may consider accepting less than the total amount owed to them.
You will need to demonstrate that you do not have the financial means to repay the shortfall between the sale price and the remaining loan balance.
How a foreclosure short sale affects your credit rating
A foreclosure is a serious financial problem that will be listed on your credit report and may remain there for up to 10 years. This will negatively affect your ability to access credit for a long time to come.
By comparison, a short sale process will still be listed on your credit report, but it will only be noted as a debt that has been settled for a lower amount than the full balance due. A foreclosure short sale listing on your credit report will cause your score to drop, but not nearly as significantly as a foreclosure.
What you need for the short sale process
If you think your financial situation could be helped by negotiating a foreclosure short sale with your bank, then you will need to provide your lender with some documentation to support your request.
- You will need to write a short sale hardship letter that explains adequately why you believe a short sale will help you.
- You should avoid trying to win any sympathy in your letter. The bank does not want to hear about how difficult your life it. They want to know how and if you are going to repay the money you borrowed from them.
- They will also require copies of your income verification, such as pay slips and tax returns.
- They will want to see your banking statements that give them an accurate picture of how dire your financial situation really is.
The short sale process begins by making a formal request to your lender
When you submit your request for the lender to consider accepting a foreclosure short sale, a negotiator will be allocated to your file. You should be aware that the negotiator is also trained to make alternative financial suggestions designed to help you keep your home.
These alternatives to a foreclosure short sale could include repayment negotiations, interest rate reductions, leniency periods and other avenues available so that you will not necessarily have to sell your home for less than its true value.
If you still believe short selling is your only option for getting out of your financial mess without the stress of a foreclosure, then a foreclosure short sale could be the ideal solution for you. Always be sure to consult with an attorney regarding your rights and your obligations in a short sale process.
Due to the nature of a foreclosure short sale, the attorney’s fees are covered by the net proceeds of the sale of your home, so these fees are deducted from the final amount accepted by the bank.