Query failed: connection to 127.0.0.1:3312 failed (errno=111, msg=Connection refused). Understanding the Basics of Short Sale Foreclosure
Remember Me
forgot your password?

Understanding the Basics of Short Sale Foreclosure

Short sale foreclosure involves two types of real estate techniques. The first involves real estate that has been repossessed by the mortgage lender. These properties are also referred to as bank owned or real estate owned (REO).

The second type of short sale foreclosure references property which is still in the borrower's possession, but on the brink of foreclosure. Lenders agree to accept less than borrowers owe in exchange for quick sale of the real estate. Short sale options are typically offered after all other options to prevent foreclosure have been unsuccessful.

Currently, banks are holding a large number of non-performing loans; meaning borrowers are not making payments. Banks and mortgage lenders receive money from the Federal Treasury based on their performing loans. When they hold too many non-performing loans, the Feds can cease lending money until their bottom line improves.

By law, banks are limited on the number of REO properties they can own. As more Americans are served with foreclosure papers, many lenders have reached their limit. Short sale foreclosure allows lenders to liquidate a portion of their real estate holdings.

Short sales can remove a huge financial burden from borrowers who do not qualify for refinancing or loan modifications. The process takes between four and nine months to complete. Much depends on the caseload of the bank and if the borrower holds multiple mortgages.

The best short sale foreclosure is known as Payment in Full with Pursuit of Deficiency Judgment. Using this arrangement, the lender accepts the sale price as payment in full towards the mortgage note. The borrower is able to walk away from their property and be released from the mortgage debt.

The worst short sale foreclosure is known as Deficiency Judgment. Many banks hold borrowers accountable for any deficiency between the loan balance and sale price. This amount is usually several thousand dollars. When borrowers hold two or more mortgages, the deficiency amount can be staggering.

When mortgage lenders issue deficiency judgments, borrowers incur several financial consequences. Judgments remain on the borrower's credit report until repaid in full. For most, this can take a lifetime to repay.

Deficiency judgments have far-reaching effects and prevent borrowers from obtaining credit for many years. Borrowers will have very little chance of qualifying for a mortgage loan while the judgment is in place.

Short sale foreclosure will impact borrowers' credit rating. 'Payment in Full' short sales are the least detrimental. Although the black mark remains on credit reports for seven years, borrowers can apply for another mortgage loan within a few years.

Short sale foreclosures are complex and confusing. Borrowers should spend time learning about the different types of short sales, along with the pros and cons of each. Arm yourself with knowledge so you are better prepared to negotiate with your lender.

Simon Volkov

Simon Volkov is a private real estate investor and author of the "Short Sale Hardship Letter eBook Course". He offers one-stop shopping for borrowers, lenders and investors by connecting buyers and sellers through his network of real estate professionals. Simon has negotiated hundreds of successful short sale transactions. If you need to sell your home fast to satisfy a short sale or are an investor looking for discounted real estate investments, stop by www.SimonVolkov.com.

Rate this Article: 0 / 5 stars - 0 vote(s)
Print Email Re-Publish

Add new Comment



Captcha
0
1. Christine (21:32, 16.09.2009)
Hello, I am on the verge of foreclosure on an INVESTMENT property I own, and it was just approved after 8 months for a short sale for 129k. I owe 275k. Since it not a primary residence, I am in trouble here. If I understand correctly, the deficiency balance can be asked for (they will not approve it as payment in full, I did ask) of a staggering 146k, OR they can simply file a 1099 and this will count as income for me and I will owe the IRS taxes on an additional 146k. My question is- Is it BETTER to just foreclose on this property and walk away from the short sale offering because the bank will not consider it payment in full? What are the advantages to short sale here? I cannot seem to find any. What happens if it forecloses; do I face the same 2 scenarios? Any other thoughts? Thank you!!! Christine

  • Latest Real Estate Articles
  • More from Simon Volkov

Should We Move Up Now? Or Wait?

By: Maria | 09/11/2009
Timing is crucial especially to home buyers nowadays. Even in this time of economic slump, home prices have considerably dipped for the last few years. Also, there are indications in which prices will keep on taking a nosedive in the upcoming months. For this reason, many prospective home buyers are taking advantage of the opportunities seen and are securing properties left and right.

Gravel vs. Grass When Landscaping

By: Roby Pagong | 09/11/2009
Homeowners pay high regards with how the exterior of their house looks like. This is because it represents them. The exterior or the curb appeal of the house is essential especially when the owner of the property wishes to sell the property. This is among the features of the home that buyers check. If they like how the house looks outside, they will most likely be interested to check how it looks inside.

How To Become A Real Estate Agent In Canada

By: Adriana N | 08/11/2009
A real estate agent is a fun and lucrative job with many opportunities to advance one's career. To become a real estate agent, one must be at least eighteen years of age and have a Canadian High School Diploma or equivalent, and speak English. Each province in Canada is responsible...

The Toronto Residential Real Estate Market is a Great Source of Investment Income

By: Stefan Hyross | 08/11/2009
Decreased consumer confidence in the real estate market has created a decline in home sales worldwide, however the Greater Toronto Area has made a recovery from the economic downturn. The Toronto Real Estate Board reported a 19% increase in the purchase of resale houses from November 2007 to November 2008,...

How To Get a Wells Fargo Loan Modification

By: Bob Mason | 08/11/2009
Some interesting information to help you get a Wells Fargo loan modification approved.

Want a Wells Loan Modification Fast

By: Bob Mason | 08/11/2009
If you want a wells fargo loan modification, here's how you can do it fast.

Bank of America – Loans & Lies, but no Real Modifications

By: Drew Sygit | 08/11/2009
In July the federal government pressured banks to modify 500,000 mortgages by November 1st. Bank of America is lying to do its part.

Get Out of Debt: Take Control of Personal Finances through Budgeting

By: Simon Volkov | 02/10/2009 | Personal Finance
Today, millions of Americans are trying to get out of debt. The quagmire is most consumers carry an overwhelming amount of debt and do not have a clue how to tackle it. According to MSN Money, 43-percent of Americans spend more than they earn and carry an average credit card debt load of $8,000.

Distressed Properties: Making Money with Foreclosure, Short Sale and Bank Owned Homes

By: Simon Volkov | 01/10/2009 | Real Estate
Distressed properties refer to foreclosure, short sale and bank owned real estate. Many investors seek out these types of properties because they can be purchased below market value. In today's market distressed real estate can be an investor's dream. However, careful consideration should be given before making an offer. Otherwise, these properties could quickly become an investor's worst nightmare.

Debt Reduction: Tips for Eliminating Debt

By: Simon Volkov | 01/10/2009 | Personal Finance
Debt reduction is becoming a necessity for most Americans. With today's unstable economy, many U.S. citizens are facing financial crisis beyond their worst nightmare. Between unemployment and failure of Wall Street, many people are beginning to realize unnecessary debt is preventing them from achieving their financial goals.

Debt Consolidation: Tips for Getting Out of Debt

By: Simon Volkov | 01/10/2009 | Personal Finance
Several debt consolidation options exist including debt consolidation loans, debt settlement, bankruptcy and credit counseling. It is best to determine which option is best suited for your financial needs and to understand any associated risks.

Are Cash Flow Notes for Sale a Safe Investment?

By: Simon Volkov | 01/10/2009 | Investing
Cash flow notes for sale offer a variety of investment opportunities. Presently, more than sixty types of cash flow notes exist. The most common types include real estate, land contracts, seller carry back mortgages, business notes and structured settlements.

Bankrupcy or Bankruptcy? Both Offer Financial Relief to Debtors

By: Simon Volkov | 01/10/2009 | Personal Finance
Bankrupcy is the most common misspelling of bankruptcy. Regardless of how you spell it, bankruptcy offers financial relief to debtors struggling to make ends meet. The bankruptcy process can be exceptionally complicated and requires assistance from a qualified lawyer.

Bank Loss Mitigators: The Role They Play Foreclosure and Short Sales

By: Simon Volkov | 01/10/2009 | Real Estate
The primary role of bank loss mitigators is to assist homeowners in developing a repayment plan to prevent their home from falling into foreclosure. Borrowers are required to submit financial documents, along with a foreclosure hardship letter, so the loss mitigator can determine which options are available.

Bank Loss Mitigation: Tips for Homeowners Facing Foreclosure

By: Simon Volkov | 01/10/2009 | Real Estate
Every mortgage lender has a bank loss mitigation division. Employees working in this department are referred to as loss mitigators. The role of loss mitigators is to work with borrowers who have fallen behind in their mortgage payments and help them establish a repayment plan to avoid foreclosure.

Submit Your Articles Free: Signup
Article Categories




Use of this web site constitutes acceptance of the Terms Of Use and Privacy Policy | User published content is licensed under a Creative Commons License.
Copyright © 2005-2008 Free Articles by ArticlesBase.com, All rights reserved. (0.84, 5, w1)