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Foreclosure is not the only exit route left for a bad mortgage. There is the option of short sale. Here the lender permits the selling of the secured property at a rate, which is lower than its value and the amount the borrower owes to the lender. The lender forgives the balance amount.
More units are going up for short sale in California, despite its negative impacts. The lender is saved the hassles and expenses of a foreclosure and the borrower is spared the stigma of it. Borrowers just allowed themselves to get into a situation wherein their monthly payments were more than double their income. With rates raising the situation became impossible.
A short sale is a good option for all three parties. The seller escapes bankruptcy, the buyer gets a reasonably priced house and the lender does not have to face the music of overseeing the legalities and procedure of foreclosure.
Lenders focus on the money coming in from investments rather than the weight of bricks and mortar. If the money flow is there the lender is not much bothered how and from where it rolls in.
A short sale is the last route of honorable escape when already the decision has been taken that the house cannot be retained. Whether one will opt for it or not depends on the specific situation. If the financial difficulty is temporary and there is hope down the road then its best to hold on. But if foreclosure is knocking then a short sale is better.
It is advisable to work with an agent who deals with and is experienced about short sales. The seller has to get together enough facts and evidence to convince the lender that a short sale is the best option for him or her also. The lender will want to scrutinize the borrower’s bank statements, tax returns, debt accounts to be convinced that a short sale at less the market price will be beneficial as regards further costs and time to push through a foreclosure operation. Mere talking will not do – papers must do the convincing. So professional help will help.
In a short sale some amount of debt is forgiven. This will attract taxes. So it is advisable to talk to tax experts ahead of the deal so as not to be surprised with a tax bill.
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[...] than 55% of all the residential house sales came from the distressed category of foreclosure or short sales. This messes up the median values. But if count is taken only of the houses that were sold for [...]