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The past two years have been a recovery process for the real estate market in the United States. It has seen record foreclosure numbers and heavily decreased property values. Many homeowners have chosen to walk away from homes they purchased during the first half of the decade because they were either discouraged by falling home values or they entered into an adjustable rate mortgage that they can no longer afford.
If you’re in one of these situations, learn some of the techniques on how to avoid foreclosure on your home.
Why Short Sales?
A foreclosure will destroy your credit, and your ability to purchase another home will disappear for at least three years after the foreclosure goes through. Many homeowners don’t want this, so they look to the option of short selling their home.
Short selling your home means that you reach an agreement with your mortgage lender to sell the home at a price below the amount of the mortgage note. The lender must approve any sale prices below the actual amount of the loan.
Short selling is not an easy process, and it should never be presented to you as being easy, but it’s a valid option that you should consider before completely giving up and foreclosing on your home.
Step 1: Find A Real Estate Professional Experienced With Short Sales
Finding the right real estate broker and agent to list and negotiate your short sale is the most important part of successfully short selling your home.
Many agents are not generating much business in traditional real estate work lately, so they have tried to position themselves as foreclosure and short sale experts, but in reality, they have little experience with actually closing any short sale deals. The only way you can be confident in picking the right agent is by requesting examples of previous short sales they were involved in. If you know someone personally who has gone through a short sale, ask who they used. Personal referrals are the best source for finding a competent professional.
Also, make sure that you are actively involved in the short sale process. Don’t set the agent loose and forget about it. Ask them to give you weekly updates, and be educated and involved in the process.
Step 2: Keep Your Home In Great Shape
Just because you’re short selling your home doesn’t mean you can let it become a piece of junk.
You’re still selling a home, and you should treat it the same way you would if you were going through a traditional sale process. Clean out all of the junk and clutter in your home, stage the home with fresh flowers and decorative pieces and maintain the exterior landscaping. Even if you’ve already moved out of the property, don’t let it look like a bank-owned property.
A short sale deal will attract a lot of investors who don’t care what the property looks like, but there’s also a lot of first-time home buyers looking for great deals that will care about the condition of the property, and you don’t want to lose out on them making an offer.
Step 3: Request a Short Sale Without Recourse
This allows you to pay off less than the amount owed without the mortgage company suing you for the difference in price. If you do not get a “short sale without recourse,” you will still owe your mortgage company the difference between the sale price and your payoff amount, and they have the legal right to go after you to recover that difference.
Whether they’ll actually do it depends on the internal policies of the lender and the amount of the difference you owe. Mortgage companies are not obligated to accept a short sale without recourse, but it’s very important to always request it, because some of them may not want to spend the legal costs involved to sue you for the difference.
Remember, short sales do damage your credit, but it’s less severe than a foreclosure on your credit report. Short sales are very difficult to negotiate with the mortgage lender.
In 2008, Fannie Mae estimated that for every short sale that went through, eight more homes were foreclosed on. But, this shouldn’t discourage you from trying, and it should always be an option you consider before going through the foreclosure process.