The nightmare of every homeowner is losing their home through foreclosure. Unfortunately, this is a reality of homeowners struggling to keep up with their mortgage payments. If a foreclosure pushed through, the house would be seized from the owner by the lender as a consequence of the owner defaulting – or not being able to pay – on mortgage payments.
Fortunately, there is hope for these homeowners. They can have a short sale, wherein another party offers to buy the house before it is foreclosed. This way, although the homeowner does end up losing the house, he or she is compensated for this loss. Here are the other benefits of opting for a short sale in the face of foreclosure:
Protect your credit standing
If your house is foreclosed, this will show on your credit record and make it more difficult for you to take out another mortgage or apply for any other kind of loan. Furthermore, a bank can file a lawsuit – known as a deficiency judgment – if they believe the difference in the value of mortgage payments paid and the amount of the original loan is substantial enough. This can do worse damage to a homeowner’s credit score. This makes the prospect of a short sale more appealing to both lenders and banks, as it means that there might be some money recovered from the sale of the home.
Save your money and resources
Beyond losing a house, the foreclosure process itself is also expensive for a homeowner. Homeowners can spend thousands of dollars during the foreclosure process on legal fees and any other additional costs. Furthermore, the process itself can take a long time, giving added emotional stress to the homeowner as well.
A short sale can prevent all of this by getting a homeowner out of the foreclosure process before it can even begin. This way, they get to avoid spending so much effort, time, and resources to have their homes taken away from them. Instead, a short sale even promises an opportunity to be able to start again with some financing already available.
Benefit the rest of the market
It is not only the homeowner that can benefit from a short sale but the rest of the players in the market as well. First, the lender can have the work of having the home sold done on his or her behalf. If the house were to be foreclosed, the lender will end up having to sell it anyway to make up for the lost mortgage payments. A short sale can help lenders recover these costs without much effort on their part.
Foreclosure sales can also be devastating to the economy and housing market of a local community, as a large number of foreclosed homes that are rotting away can end up chipping away at the livability of a neighborhood. A short sale makes it easier for people to buy homes at lower prices without having to go through the bureaucracies involved.
Although nobody wishes to have their homes foreclosed, it is best to know what to do in case it happens to any of us. This way, we are free to consider the best option for ourselves carefully.