Learning About The Difference Of Foreclosure Vs. Real Estate Short Sales
- By Simon Volkov
- Published 12/18/2011
- Selling
- Unrated
The main difference of short sales vs. foreclosure is real estate short sales lets property owners sell their house for less than the amount due on the real estate note. With foreclosure, banks take back the real estate via court order unless arrangements are made to turn over the home using deed in lieu.
Deed in lieu lets borrowers prevent having to go through the foreclosure process and can get rid of costly legal fees charged by the mortgage company.
Both short sales and deed in lieu agreements have to be approved by banks. The process can be long and trying. Property owners must supply banks with a letter of financial hardship letter and supply personal finance records to show evidence they do not have assets that could be used to pay off the mortgage note.
It is imperative to ask mortgage providers if they accept the short sale price or return of property as payment in full toward the mortgage loan or if they will acquire a deficiency judgment. A vast majority of lenders hold property owners responsible for the deficiency amount of their loan balance and the sale price of their property.
Deficiency judgments can wreak havoc on personal finances for decades. Worse yet, lenders can try to collect outstanding balances by means of garnishing wage earnings. Considering that deficiency amounts often amount to several thousand dollars it could be necessary to retain services from a real estate attorney to bargain the short sale application or deed in lieu contract.
One strategy to avoid having to pay deficiency judgments is when loans are owned by by mortgage companies that participate in Making Home Affordable. This government sponsored program has helped countless borrowers since it was created in 2009.
Originally, Making Home Affordable offered loan modifications and mortgage refinance to borrowers that were having trouble meeting loan installments. As more and more borrowers started losing their real estate to foreclosure, Home Affordable started offering foreclosure alternative solutions including short selling and deed in lieu of foreclsoure.
Property owners that obtain deed in lieu of foreclosure or authorization to short sale their home through Home Affordable Foreclosure Alternatives (HAFA) are not responsible for defic
iency judgments. Instead, their loan is zeroed out and there is no further financial responsibility.
HAFA is available to borrowers that have mortgage notes guaranteed by Fannie Mae, Freddie Mac, or the one hundred plus mortgage companies that are participating in the MHA program. Under HAFA, homeowners that are eligible for short sale are required to list their house with a licensed real estate agent for a minimum of 120 days prior to submitting a short sale application form to Home Affordable program.
Homeowners that meet deed in lieu of foreclosure or qualifications for short sale might also be eligible for up to $3000 in relocation assistance funds. A list of participating banks and eligibility requirements are offered at the Making Home Affordable website.
Mortgagors that have mortgages with lenders that are not engaged in Making Home Affordable will have to work directly with their bank's loss mitigation division. Bank loss mitigators gather necessary documents and conduct a financial audit of each homeowner.
Non-participating banks might or might not have the same requirements, so it is important to understand their process. Mortgagors might find it benefical to employ services of a real estate attorney or acquire HUD housing counseling.
Currently, HUD housing counseling is offered for free. However, government budget cuts may do away with funding for this program, so anyone in need of help should contact HUD very soon.
Borrowers that have defaulted on their loan and are not eligible for real estate short sales should inquire about the option of deed in lieu of foreclosure with their mortgage provider. If banks are not willing to let borrowers give back their house then the only thing left is to endure the foreclosure process and eventually vacate the house.
Mortgagors that require help with either short sales or foreclosure ought to contact their lender or apply for help through MHA. Even though the situation might look hopeless, there is potential that homeowners might qualify for other options such as modified loans or deferred payments. In some situations, loan installments are reduced by five hundred dollars per month and can help borrowers keep their property.
Choosing between short sales vs. foreclosure can be a heart-wrenching decision. With the proper resources homeowners can make informed decisions and possibly avoid deficiency judgments that could cause problems for them for many years.
Deed in lieu lets borrowers prevent having to go through the foreclosure process and can get rid of costly legal fees charged by the mortgage company.
Both short sales and deed in lieu agreements have to be approved by banks. The process can be long and trying. Property owners must supply banks with a letter of financial hardship letter and supply personal finance records to show evidence they do not have assets that could be used to pay off the mortgage note.
It is imperative to ask mortgage providers if they accept the short sale price or return of property as payment in full toward the mortgage loan or if they will acquire a deficiency judgment. A vast majority of lenders hold property owners responsible for the deficiency amount of their loan balance and the sale price of their property.
Deficiency judgments can wreak havoc on personal finances for decades. Worse yet, lenders can try to collect outstanding balances by means of garnishing wage earnings. Considering that deficiency amounts often amount to several thousand dollars it could be necessary to retain services from a real estate attorney to bargain the short sale application or deed in lieu contract.
One strategy to avoid having to pay deficiency judgments is when loans are owned by by mortgage companies that participate in Making Home Affordable. This government sponsored program has helped countless borrowers since it was created in 2009.
Originally, Making Home Affordable offered loan modifications and mortgage refinance to borrowers that were having trouble meeting loan installments. As more and more borrowers started losing their real estate to foreclosure, Home Affordable started offering foreclosure alternative solutions including short selling and deed in lieu of foreclsoure.
Property owners that obtain deed in lieu of foreclosure or authorization to short sale their home through Home Affordable Foreclosure Alternatives (HAFA) are not responsible for defic
HAFA is available to borrowers that have mortgage notes guaranteed by Fannie Mae, Freddie Mac, or the one hundred plus mortgage companies that are participating in the MHA program. Under HAFA, homeowners that are eligible for short sale are required to list their house with a licensed real estate agent for a minimum of 120 days prior to submitting a short sale application form to Home Affordable program.
Homeowners that meet deed in lieu of foreclosure or qualifications for short sale might also be eligible for up to $3000 in relocation assistance funds. A list of participating banks and eligibility requirements are offered at the Making Home Affordable website.
Mortgagors that have mortgages with lenders that are not engaged in Making Home Affordable will have to work directly with their bank's loss mitigation division. Bank loss mitigators gather necessary documents and conduct a financial audit of each homeowner.
Non-participating banks might or might not have the same requirements, so it is important to understand their process. Mortgagors might find it benefical to employ services of a real estate attorney or acquire HUD housing counseling.
Currently, HUD housing counseling is offered for free. However, government budget cuts may do away with funding for this program, so anyone in need of help should contact HUD very soon.
Borrowers that have defaulted on their loan and are not eligible for real estate short sales should inquire about the option of deed in lieu of foreclosure with their mortgage provider. If banks are not willing to let borrowers give back their house then the only thing left is to endure the foreclosure process and eventually vacate the house.
Mortgagors that require help with either short sales or foreclosure ought to contact their lender or apply for help through MHA. Even though the situation might look hopeless, there is potential that homeowners might qualify for other options such as modified loans or deferred payments. In some situations, loan installments are reduced by five hundred dollars per month and can help borrowers keep their property.
Choosing between short sales vs. foreclosure can be a heart-wrenching decision. With the proper resources homeowners can make informed decisions and possibly avoid deficiency judgments that could cause problems for them for many years.
Simon Volkov
Learn about foreclosure and short sales from real estate investor, Simon Volkov. His website includes an article library to help homeowners learn about foreclosure prevention alternatives and government programs.
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