Steps of Foreclosure

Short Sale Foreclosure

A short sale foreclosure, in real estate terms, is the sale of a house where the sale price is less that what the current homeowner owes on the mortgage. Lenders will sometimes agree to a short sale and take a small loss on the loan instead of going through the lengthy foreclosure process. If the lender does agree to a short sale foreclosure, it most cases they will sale the house for less than it is worth and forgive the rest of the loan that is owed.

A short sale foreclosure can be a great opportunity for everyone involved. The seller gets out from under a mortgage liability that they can no longer afford without facing bankruptcy. The buyer gets a house at a reduced price. The lender can minimize their loss without going through the long foreclosure process and possibly be stuck with an unsalable property.

Lenders will benefit from a short sale foreclosure because they won’t have to go through the lengthy and costly process of a foreclosure, then put the house on the market, going through the entire marketing process in order to sell the house and possibly having the house set unoccupied for a number of months. There was a study performed by the congressional Joint Economic Committee in the first part of 2008, that stated foreclosures could cost the lenders as much as $50,000 per foreclosure.

Buyers should work with real estate agents who are familiar with the short sale foreclosure process. The process itself can be a lengthy, frustrating one. Experienced agents can help with the negotiating process and also inform the buyer what type of paperwork they are going to need in order to convince the lender that a short sale foreclosure is the best option for that piece of property.

If you are considering a short sale foreclosure, make sure that you get everything in writing. If the lender agrees to take a short sale get it in writing that you will be absolved of all debts associated with the mortgage. Also, work with the lender to make sure the short sale foreclosure shows the debt was satisfied and not shown as settled for less than the full balance because this could affect your credit rating. You will want to check and see if there are any types of tax ramifications associated with your short sale foreclosure. If possible contact a tax attorney prior to finalizing your short sale foreclosure.