If you’ve gotten behind on your mortgage or if you owe more than your home is worth then you may be wondering what to do. Maybe you’ve received a foreclosure notice from the bank and you want to know if you can still do a short sale.
These are all good questions to be asking. And many homeowners don’t understand their options at this point.
And if you are seriously delinquent on your mortgage and have little hope of turning things around, should you even consider bankruptcy.
Again you may be feeling like you are between a rock and a hard place.
But the fact is you have many options.
And if your situation is so bad that you are thinking of just walking away from your home… stop before you make a drastic mistake. A short sale is always an option… even down to the last minute of a foreclosure proceedings. Leaving your home and walking away from your mortgage will have credit implications for years to come. There are better options.
Let’s take a look at the pluses and minus of foreclosure and doing a short sale.
If you’ve received a foreclosure notice from your lender, you have a certain amount of time to respond, usually 20 days in Florida. Depending on the exact process the lender uses, you will eventually be asked to move out and your home will go up for auction. The first thing to do is respond to the notice. Not responding gives the lender the upper hand and you may lose your home. Contact and show them you are serious about resolving the problem.
During the foreclosure process you have many options still available…
Reinstatement – if you can come up with the money you owe you can have the foreclosure stopped or “reinstated”.
Forbearance – if you can come up with a payment plan the lender will stop the foreclosure. Just be sure you can do what you say you will do.
Loan Modification – lenders are willing to negotiate these days. They don’t want to forclose. That means they will be in the real estate selling business. They don’t want that. Again don’t be afraid to ask for a loan restructuring. What have you go to lose?
Short Sale – selling your home “short” of what is owed is always an option. You will have to convince the bank that you have a hardship though. You can begin trying to sell your home at any time after receiving the notice up to the day of the foreclosure auction.
Short Sale Benefits
There are many reasons that a short sale can be your best option. The most important of which is it will get you out of a bad situation with the least amount of affect on your credit and peace of mind. The stress reduction alone may be worth it.
- You get control of the process again and the bank doesn’t have to boss you around
- You won’t have to deal with the stress of a foreclosure and the stigma attached
- You can even be current on your loan payments and still do a short sale
- The selling process is pretty much like any other real estate sale
- Now the bad news is a short sale will still affect your credit.
The Government’s HAFA Program
The federal government can actually help in your situation. The have a program to deal with the real estate crisis called the Home Affordable Foreclosure Alternative program (HAFA). The HAFA program offers two alternatives to get out of your home without foreclosure.
- Arranging A Short Sale
- Deed-In-Lieu (DIL) of Foreclosure
In the short sale option you can sell your home for less than what you owe. Here’s a video that explains a bit of the program.
What if you know you need to get out and can no longer afford your home. Here’s a video that explains how to make a graceful exit.