Foreclosure short sales can help both homeowners and home buyers, if addressed appropriately. It is true, having your home foreclosed is a major financial roadblock to anybody. You will have to go through so many challenges just to heal financially.
Add to this the emotional and mental fatigue that will definitely come with foreclosure — it can be embarrassing, exhausting or just traumatic for the homeowners.
Fortunately, there are several ways by which you can avoid being foreclosed upon, and one of these are foreclosure short sales.
Short sale definition
Home short sales are essentially the sale of a particular property at a price that is much lower than the total amount of money still owed to the lender. Banks and other lenders do this if they believe that they will have a hard time selling the property at the market value in the near future.
More short sale information
Sold or not, such houses will continue to depreciate and for these lenders, it is better to put them up for foreclosure short sales than be stuck without a buyer for a long time.
On the other hand, a foreclosure process is not the only reason for putting up a house for short sale. It may also be a way to bring up the market value of the home after it has fallen behind the balance of the mortgage loan.
Similarly, not all homes under foreclosure can be purchased on foreclosure short sales. It all depends on how much money is still owed on the mortgage. If the balance is small compared to the market value of the home, a lender would probably go ahead with the foreclosure process because he is in a position to sell the home at a low price and still make a good profit.
However, if the value of the home is much lower than what is owed on the mortgage, he will definitely decide to put it on short sale foreclosure.
Short sale investing
When looking around for an inexpensive house, foreclosure short sales are definitely one way to go. But just because a home is in a pre foreclosure short sale does not mean that you will be able to get it at your first offer. You do have to realize that you will be competing against other buyers like yourself and the price may still go up considerably as the bidding goes on.
Foreclosure short sales for homeowners
If you are a homeowner and have received already received a foreclosure notice in the mail, you can look at a foreclosure short sale as one of your options in order to avoid actual foreclosure. This is a great way to put you out of your financial misery — or maybe not.
When you sell your home, there may be considerable taxes involved that will be payable by the seller, which in this case is you. Before you go down this path, check to see if you are covered by the Mortgage Forgiveness Debt Relief Act of 2007, in which case you will not have to pay these taxes.
The pre foreclosure short sale
Also, a pre foreclosure short sale may reflect very poorly on your credit rating, more so than a foreclosure itself. The sale may give you instant cash and allow you to pay your debts, but the consequences may be more damaging in the long run.
In order to figure out your best move, before going on with foreclosure short sales, it is recommended that you seek the advice of a lawyer or a real estate expert.