Since the real estate bottom fell out, short sales have become the magic pill for many banks and lenders that just do not want to lose their entire investment through a foreclosure process.
Being able to recoup some of the money they lend is better than not collecting anything at all.
This practice is growing in popularity and is great news for struggling homeowners who are seeing their home devalue with increasing rate and still paying more on their mortgage than their home is worth.
Prevent Foreclosure: Losing your home is a devastating experience especially when you are forced into it through foreclosures combined with harsh economic realities of job loss across the country.
A lot of homeowners are faced with a mortgage with an adjustable rate meaning their payments could be increased at any time the market fluctuates or the banks deem.
An example of a short sale is when you decide to pay off your loan by selling your house.
Let us say you sell your house for $140 000 dollars which is less than the mortgage you owe to the bank of say $200 000.
Using a short sale you negotiate with the lender to accept the lower price of the sale of your home at discount in exchange for the total amount of the mortgage.
The difference of $60 000 that is still owed on the mortgage is forgiven.
Should You Sell Your Home? Although you lose your home by deciding to sell it, you will actually be in an advantageous position.
It is like selling your car before it is too old to be worth anything.
For people looking to buy a property, you will find homes for sale at a discounted price and the opportunity to save some money on the purchase.
There are many other programs to assist homeowners to stay in their home and renegotiate the terms of their mortgage.
This may be ideal for anyone who is experiencing some trouble in the short term and willing to continue to pay a mortgage that is value well over the property's worth.
Yet, even with a loan modification, it might make more sense to cut losses while you are still ahead of the game.
Should You Consider Loan Modification? Loan modification is a process of re negotiating your mortgage to lower the payment to make if more affordable for you to keep your home.
One of the problems with this option is that it is based on an adjustable interest rate.
This means that once you actually finish negotiating the loan modification you may find that you are actually committed to making higher mortgage payments than you did before the negotiations.
Also the terms to qualify for a loan modification is a very lengthy process, which if you are facing eminent foreclosure on you home, you just do not have the time to get it approved and still keep you home.
It all depends on your situation, but generally most people will qualify for a short sale of their home and quickly be able to enjoy less stressed out life dealing with the mortgage burden.