Good News for Distressed Homeowners: Lenders Settling for Less
11 June 2008A few years ago, mortgage lenders do not think twice when it comes to repossessing homes due to default. But when the subprime mess hit, lenders are now accepting alternatives to foreclosure including a short sale.
Simply put, a short sale is when a homeowner is allowed to sell the distressed property for less than the mortgage amount owed, in order to avoid a foreclosure. This option is increasingly becoming popular these days especially with the foreclosure rate at record level.
The good thing about a short sale is that the lender will be able to recover some of the loan money and they no longer have to worry about foreclosure expenses including holding costs. For distressed homeowners, there will be no need for you to suffer further from having a foreclosure record in your credit history. But there are instances where the bank will still require you to pay the difference. And there also some taxes that you will need to settle. Even so, this is certainly better than the alternative.
On the other hand, real estate brokers view this option as disadvantageous to the overall real estate market. For them, the popularity of short sales as an alternative to foreclosure has made neighborhoods appear less valuable.
The rising foreclosure rate in the country has already affected home prices greatly. Cities where foreclosure surge have experienced great decline in home prices. This is also perhaps the reason why many lenders are agreeing to short sales since the owners are having trouble selling their homes at an amount that will allow them to pay their entire mortgage debt. For instance, homes that were appraised a year ago at $290,000 are now valued at $220,000.
If you are one of the many distressed homeowners, you can always try discussing this option with your lender to stop foreclosure. Try to also look for a reputable foreclosure broker who can help you sell your home.
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