Avoiding Foreclosure…

• Deed-in-lieu of Foreclosure – A deed-in-lieu of foreclosure is sometimes referred to as a friendly foreclosure because the homeowner essentially gives the deed back to the bank.

• Bankruptcy – A bankruptcy may stop a foreclosure and allow homeowners to reorganize their debt and keep their property. Consult an attorney to see if this is a viable option for our situation.

• Servicemembers Civil Relief Act (SCRA) – This law provides certain protection to military personnel who are in foreclosure in specific situations. For more information: http://www.military.com/benefits/legal-matters/scra/overview

• Short Sale – When homeowners owe more on a property than it is currently worth and one of the previous

solutions does not apply to their situation, there is the option of pursuing a short sale.

In the past, it was rare that a bank or lender would accept a short sale. However, due to the overwhelming market changes, lenders have become much more negotiable when it comes to these transactions. Recent policy changes within many organizations have made the chances of getting a short sale approved even higher.

The following information describes the short sale process:

§ Homeowners are “short” when they owe an amount on their property that is higher than the current market value.

§ A short sale occurs when a negotiation is entered into with the homeowner’s mortgage company to accept less than the full balance of the loan at closing.

§ A buyer closes on the property, and the property is “sold short.”

It is important to note that the Short Sale option is not an automatically approved option. There is an approval process that the troubled homeowner must go through to be approved for the option of a short sale. This can be a somewhat lengthy process; so, it is extremely important that the homeowner pursue this option as early as possible. Ironically, lenders generally will not discuss a short sale if the loan is not in default. However, if you can show cause to support that default is eminent, you should certainly attempt Short Sale pre-approval prior to default, as Short Sale Pre-Approval does not stop the foreclosure process and time can run-out on the homeowner. The Short Sale must be closed prior to the actual foreclosure sale on the courthouse steps.

The chart below explains the consequences to the homeowner for a successful short sale versus a foreclosure.

Regardless of the option chosen, communication and a pro-active plan are essential to avoiding foreclosure.

For more information, contact a qualified real estate agent.

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