One strategy that can be used to avoid the stigma of a foreclosure while saving your credit history is to use a short sale. A short sale is a sale of real estate at a price that is lower than the outstanding balance on the mortgage loan. A short sale offers a viable option to obtain the major portion of the debt that is owed to the mortgage holder. Even if the full amount cannot be garnered through a short sale on the property, this strategy places the homeowner in a favorable light with the lender.
A short sale also allows the homeowner to maintain some sense of dignity and semblance of financial responsibility while avoiding all of the negative consequences of a foreclosure. Banks, lenders, and mortgage companies are all in the business of making money. This means that sometimes they are more than willing to cut their losses and avoid foreclosing on the property of a homeowner who is obviously willing to pay off their debt.
Homes have depreciated in value in many areas. This means that the likelihood of realizing the full amount of the mortgage debt is diminished. Even so, the homeowner will have an easier time selling the home during a buyer’s market when and if he offers the home at a lower price than the current market value.
Lenders are usually more than willing to forego a foreclosure in favor of a short sale since they can also avoid the negative financial ramifications of this type of procedure. The lender can avoid the monetary costs of dealing with a foreclosure while recouping a major portion of the debt. The homeowner can avoid the negative impact to his credit report by avoiding a foreclosure. The incidence of a foreclosure remains on an individual’s credit report for ten years. That is a long time to suffer the consequences of a down housing market and financial difficulty.
Additional benefits of undergoing a short sale include some negotiable points for the homeowner. The current homeowner might be able to negotiate remaining in the home until the new owner takes possession of the home. If this were to occur, the current homeowner might be able to do so without making mortgage payments. Quite often, foreclosure proceedings eventually turn into bankruptcy proceedings somewhere down the line. Avoiding a foreclosure could help an individual avoid a bankruptcy.
