Tom Luxsox Coins

Dime Certified

Foreclosed Solutions That Don't Cost a Dime

Few homeowners want to hear the word "foreclosed". People facing foreclosure experience a rush of thoughts and emotions that can sometimes bring on erratic behavior. There's fear, anger, embarrassment, shame, along with incessant worry over how to fix the problem.

Banks do not want to own foreclosed properties. They are in the business of lending money, not property management. Not to mention, mortgage financier Freddie Mac claims the average foreclosure costs banks around $70,000.

Part of the banking bail-out plan requires lenders to offer short sales to borrowers who fit certain criteria. Short sales are exactly what they sound like; the property is sold 'short' of its value. When lenders engage in short sales they agree to accept the sale price to satisfy the mortgage loan.

Although the lender incurs a loss on their investment, it is less costly than foreclosure. Short sales also release the lender from the responsibility of maintaining the property. In most cases, short sales are a smarter financial decision for the bank.

At present, standard protocol is non-existent. However, most banks require substantial financial documentation to prove the borrower is financially insolvent and has no ability to repay his mortgage note.

Time is of the essence when it comes to short sales. If your payments are delinquent and you are struggling to make ends meet, now is the time to contact your lender. This can be easier said than done because banks are overwhelmed with delinquent accounts and foreclosure properties. You must be persistent in attempting to make contact.

If you are not able to reach your lender by phone, send them a letter via certified mail with return receipt requested. Make certain to retain a copy of the letter, along with the receipt and tracking number. Attach the signature card when it is returned.

Obtaining short sale approval is not easy, but can save you thousands of dollars in the long run. It can also be less detrimental on your credit. Short sales remain on your credit report for up to seven years, while foreclosures stick around for ten years.

When negotiating with your lender, it is important to obtain a Payment in Full without Pursuit of Deficiency Judgment agreement. This means the lender will accept the sale price as payment in full and you can walk away from your home without owing additional money.

When you obtain a payment in full agreement and are able to establish a solid track record of financial responsibility, you can apply for another mortgage loan within a year or two.

Some lenders hold borrowers responsible for the deficiency amount between the sale price and loan balance. The judgment remains on your credit report until it is paid in full. Considering short sale deficiencies can amount to several thousand dollars, it can take several years to repay the judgment.

Short sale transactions are multi-faceted, so it is a good idea to become educated about the process and all that is involved. The best place to start is by talking with your lender to determine what options they offer. Then, conduct research via the Internet to obtain further information on the short sale strategies your lender utilizes.

About the Author

Simon Volkov is a California real estate investor and short sale specialist who buys and sells foreclosed real estate. Simon is the author of the highly popular "Short Sale Hardship Letter eBook Course" and has written hundreds of real estate, investing, and personal finance articles. Simon offers a variety of strategies to help struggling homeowners prevent foreclosure. Learn more at www.SimonVolkov.com.

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