If a homeowner wants to avoid foreclosure, one option is called a short sale. This is when a homeowner finds a new buyer for their home, and the bank agrees to it.
The bank will want to make sure that they are getting today's market value for the house, and the bank will ask for many documents to determine that the process of short sale is necessary.
"The lender agrees to take a payoff of less than what they're owed," explained Former President of the Realtors Association of the Palm Beaches, Bill Richardson.
Questions are key in making any large decision regarding your home's future.
"Usually on a first mortgage, you get pretty much a full release, you get what's called on your credit report, 'paid in full for less than the amount owed.' At that point, your delinquent payments stop and your credit repair is much faster," explained Richardson.
"One of the first questions I would be asking if I were going to be doing a short sale would be, who is going to be processing it?" said Richardson.
He suggests considering using a law firm in conjunction with your realty firm. Most often, he says, the bank will end up paying the fees for the realtor and their team.
"You should have a professional processing team doing the short sale for you," Richardson said.
A short sale will allow the bank to recover more assets than on a foreclosure because it doesn't take as long, according to Richardson. There will not be as many delinquent taxes and HOA fees, and the house is generally in better condition if people continue to live in it, versus a foreclosure where a home could sit empty for an extended period of time.
As with any important financial decision that affects your future, consult with experts. Richardson suggests every homeowner seek the guidance of a trusted real estate agent before taking steps towards any important change.
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