Dealing with Foreclosure and Debt
A property is in distress when a mortgage borrower can no longer pay for their mortgaged property or if the market value of the property is less than the mortgage. Solutions to distressed property debt are: short sales, loan modifications or the negotiation of a Deed-in-Lieu of foreclosure. Common situations where distressed sales occur include divorce, foreclosures or when the borrower is forced to relocate.
A home foreclosure is a process undertaken by your lender to regain property they financed for you. When the lender forecloses on the homeowner, the homeowner must move out of the house, therefore, losing all possession of the property and jeopardizing any possible equity that the homeowner may have in the home.
A short sale is any sale of real estate that generates proceeds that are less than the amount owed on the property. A real estate short sale is negotiation between the lender and borrower to sell the property absorbing a moderate loss and can be preferable rather than the borrower defaulting on the loan. If the borrower is already in default a short sale is is viable alternative to having the bank foreclosure on your property allowing the property to be sold at public auction.
A permanent loan modification agreement is a long-term solution for borrowers who will never be able to repay an existing loan. A meaningful loan modification typically involve a reduction in the interest rate on the loan, an extension of the length of the term of the loan, a different type of loan or any combination of the three. A lender might be open to modifying a loan because the cost of doing so is less than the cost of default.
Foreclosure vs. Short Sale
When considering to short sale your property and defend a foreclosure a person should consider the consequences to their credit and future employment. Click here for a side-by-side comparison.