With the economy in recession and the broader housing market in its worst slump ever, many homeowners are experiencing difficulties paying the mortgage. Often overlooked, a real estate short sale is one solution for home owners who are at serious risk of the lender foreclosing on the property.

Foreclosure is an expensive option for mortgage lenders due to the legal costs and property price loss incurred. Therefore, most mortgage lenders offer options to avoid foreclosure. In a shortsale, the lender accepts a lower sale price for the home than the amount that remains outstanding on the mortgage. The option is particularly attractive in down housing markets where homes are losing value and the owner otherwise finds it impossible to sell the home for at least the price at which it was purchased.

Although shortsales negatively impact the owner’s credit report, the effect is not as punishing as with a foreclosure. Therefore, owners with marginal credit scores who might otherwise experience difficulties finding another mortgage lender can use this option as a springboard to a new, more affordable home.

Mortgage lenders apply various standards when considering the acceptance of a short sale. The terms of agreement are often complicated, and can contain pitfalls for the owner. The owner should clearly understand to what extent the sale proceeds will satisfy the outstanding mortgage debt. If not careful, an unwitting borrower may be surprised to find mortgage bills continuing to accrue even after the home is sold.

Such agreements are typically conducted through the lender’s department of loss mitigation. The diligent owner should engage in an ongoing discussion with the lender in order to ensure the final sales price meets the owner’s expectations for debt reduction, while still allowing the owner the time and financial resources to obtain new housing.

Foreclosure is the most severe option faced by a home owner in dire financial straits. A short sale is the next, less severe option. Other, less radical solutions, such as loan modification and payment forbearance, may be offered by the lender. To avoid being rushed into any complicated agreement, communication with the lender well before foreclosure is imminent is critical for any homeowner who is considering this option. A good way to start researching foreclosure avoidant options such as short sales is to visit a loss mitigation specialist such as Access Loss Mitigaiton.

This entry was posted on Sunday, January 25th, 2009 at 3:35 pm and is filed under Foreclosure, Real Estate Short Sale, Short Sale, Short Sales, Shortsale, Shortsales, loss mitigation, loss mitigation specialist. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.