FORECLOSURE
and NOTICE
OF DEFAULT PROCESS
What
is a Short Sale?
A
short sale happens when the bank is shorted on a mortgage, meaning the lender
accepts less than the total amount that is due. If your mortgage is $200,000,
but your home, in today’s market is worth, say, $160,000, you are $40,000 short,
after the sale not including costs to close the sale such as real estate commissions,
recording fees or title and escrow charges. The homeowner avoids foreclosure
and lessens the affect on his credit.
Why
should a lender be willing to negotiate?
Reason
#1
Because
they want to avoid foreclosure at all costs – and here’s why. When a bank forecloses
on a home it becomes a non-performing loan. This affects the amount of money
a bank can borrow from the Federal Reserve. Since banks only make money by borrowing
from the Fed and lending to the public, they must borrow as much as they can.
Every non-performing loan reduces the amount the bank can lend to the public,
affecting their bottom line profits.
Reason
#2
The
bank knows if the property is foreclosed, it goes to auction and is sold for
what is owed or less. Think about it – if you were in their shoes, wouldn’t
you rather recoup something rather than nothing at all? So for the bank a short
sale creates a win-win situation for everyone involved. The bank gets some money,
but more importantly they keep a non-performing loan off their books.
If you
are considering selling or buying a short sale, there could be drawbacks. For
your protection, I suggest you consult:
Stumble It!