Solution To Foreclosure
Reading this one can assume that you are about to enter pre foreclosure or are anticipating doing so in the not too distant future. As you may well know (and for those who don’t), a pre foreclosure is that period as defined by the state between the homeowner defaulting on one or more mortgage payments and the property itself entering foreclosure. During the pre foreclosure period, the homeowner might consider a short sale, the process of which will be explained below.
Process of Short Sale
Short sales are not uncommon, but might be refused by the lender as an option available to the homeowner during the pre foreclosure period. The reason for this is that the lender knows he will be receiving less than the worth of the outstanding amount and it might just be more worth his while to foreclose than approve a pre foreclosure short sale deal.
But let’s say you’re in that position and are seriously considering a short sale – what are the things you need to do in order to avoid foreclosure and escape relatively unharmed?
The first step would obviously to call the lender and discuss the issue with the person in charge of short sales. This will give you an early indication of whether the lender will allow the short sale of the property in its pre foreclosure state, or not. When the OK has been received (even on a preliminary basis), it is best advised to employ the services of a real estate legal practitioner as well as a registered accountant. Where the former will be able to analyse your case, the latter will be able to advise you on the tax implications. It is best advised to query both of them on whether you qualify for the Mortgage Forgiveness Debt Relief Act (2007) as this could be the difference between a huge amount of tax.
Next up would be the pre-sale analysis of the pre foreclosure property. How much will it sell for? What are the current market trends? Do you have any assets, bonds, other properties, stocks or savings accounts? These represent just some of the questions that need to be answered truthfully for the lender to consider your short sale application. In some cases an additional ‘Letter of Hardship’ could benefit your chances as an explanation as to how these pre foreclosure circumstances arose. Again, it is best to be honest here as the lender could well require documented verification of the facts.
As your short sale is approved and the house is listed, potential buyers might enquire as to the low price of the house. Those pre foreclosure homes listed as short sale might be an attractive offer for some, but could very well not suit the preferences of others. Be sure to negotiate the terms of the sale with the lender before the sale takes place as it will be the lender who will give the ultimate yes or no on a pre foreclosure property up for a short sale.