When it’s the signing day for a new home, no homeowner anticipates that they will ever face a foreclosure. However, an unforeseen number of homeowners undergo the anguishing process of losing their homes due to the depressed economy and real estate market crisis. Foreclosure can be a distressing, prolonged, and unsettling process, and one that can seriously affect the homeowner’s assets, credit, and savings.
But some homeowners may have another option. A short sale refers to a transaction where the bank allows homeowners who are unable to make payments on their home to sell the property for less than the amount that they are obliged to return to the bank.
In such cases, the borrower works with an agent and puts the home up for sale, usually at a significant discount. The premise is that if the homeowner can sell the property, the bank will be able to recoup most of the amount that the borrower owes.
In a short sale, the borrower is not absolved from the debt they owe with the initial mortgage. However, it is undoubtedly a better option than hard foreclosure.
Peace of Mind with a Short Sale
The buyer and the seller experience a whirlwind of activity in any real estate transaction. The very nature of such transactions is stressful. But they do not compare to the tension that a homeowner undergoes with a foreclosure. It can be quite disconcerting to face a substantial credit hit, the prolonged legal process, and the stigma associated with a foreclosure.
In terms of the seller’s credit, short sales are not entirely free of risk. Also, they will not fully mitigate the financial implications of the homeowner’s inability to pay for a residential property that they bought. However, short sales represent an opportunity for homeowners to avoid legal repercussions and the time-consuming, arduous foreclosure process.
Homeowners will find themselves in a more favorable position with short sales as well as experience a reduction in their financial obligations and the opportunity to redeem their credit to a certain extent. A short sale is a “silver lining” to homeowners and provides them with a new avenue to begin rebuilding their financial situation.
Offers Homeowners More Control
A tense and challenging process starts for a homeowner once foreclosure proceedings commence. The mailbox is inundated with demand letters and perplexing documents, besides a constant barrage of exchanges with the legal team of the lender ensue.
A short sale will still involve negotiations, documents, and meetings for the homeowner to navigate. However, the process works more like a conventional sale rather than a stressful and litigious foreclosure proceeding.
Real estate transactions are stressful by nature. But with a short sale, the homeowner is able to play a more meaningful role in the process and mainly deals with the bank, real estate agent, and buyer. Summarily, a short sale is more favorable for the homeowner, rather than being at the mercy of a bank’s legal team during foreclosure proceedings.
Financial Benefits for the Homeowner
The US Congress Joint Economic Committee reports that the average legal expense to a homeowner undergoing a foreclosure is approximately $7,500. Besides this expense, the homeowner may also incur additional costs that can pile up during the time-consuming process of foreclosure.
And financially, this may just be the tip of the iceberg for homeowners. In case the homeowner cannot afford payments, the foreclosure could create a financial predicament where bankruptcy is the only option available. Filing for bankruptcy represents grave credit implications for the borrowers as well as expenses for the lender.
Preventing an Impending Foreclosure
A homeowner faces several distressing consequences with a foreclosure. Also, it hurts the lender and the real estate market at large. The homeowner’s credit is compromised, which can make it challenging, at times, even impossible, to borrow funds for another property, vehicle, or major purchase.
In almost all cases of foreclosure, banks lose money. The lender receives a lower price for the property at an auction as well as incurs the additional cost of assigning resources to administer the foreclosure process.
Protection for Your Credit
It is better from a lender’s standpoint to recover a part of a mortgage loan rather than incur a total loss. For this reason, banks will generally settle for a short sale instead of proceeding with a foreclosure. A short sale financially benefits both the lender and borrower compared to a foreclosure.
Helps Avoid Scams
It is disheartening enough to face foreclosure on your home. To add insult to injury, there are unscrupulous opportunists waiting in wake for a chance to prey on helpless, stressed homeowners.
The process of a short sale is quite similar to a traditional sale. Therefore, the homeowner will be acquainted with the professionals they engage with. This is almost certain to eliminate the chances of a conman becoming involved in the process.
Contact a Skilled Real Estate Lawyer
If you are a distressed homeowner facing foreclosure and contemplating selling your property in a short sale, it is best to work with an experienced real estate lawyer to guide you through the process.
The dedicated real estate attorneys at Davis, Bingham, Hudson, Buckner, P.C., will offer you robust legal counsel about your liability after the sale and ensure that you have a complete understanding of the short sale documents. For a detailed consultation, speak to a skilled lawyer at (334) 821-6335 today.