The recent downturn in the economy has adversely affected the mortgage industry to a great extent. Reeling under the pressure of unemployment and inflation, more and more people are finding it difficult to keep up with their mortgage payments. They also know that if they fail to keep up with their payment schedules, foreclosure of their property will not be far away. Besides the stigma of such a situation, the credit rating of the homeowner will be adversely affected. This will have serious consequences because it will be difficult for him to get a loan in the future. To escape the blemish on the credit report and ignominy of a foreclosure, homeowners are now resorting to short sale foreclosure.

What Is Short Sale Foreclosure?

If a homeowner is unable to maintain his monthly mortgage payments and does not want a foreclosure noting on his credit report, he can opt for a property short sale to avoid foreclosure. He will need the permission of the lender to allow him to sell his property at less than the mortgage balance amount. The lender might ask the owner to furnish a hardship letter that will establish the homeowner's inability to make monthly payments. He might also ask for documents to prove the proposed selling price, balance mortgage payment amount, and other likely expenses. The lender will approve the proposed short sale foreclosure if he is satisfied that the homeowner is truly faced with a situation that has had a life-changing effect on him and has resulted in his inability to make monthly payments. Probable causes of hardship can be medical bills, divorce or separation, loss of wages due to bad health, and inability to work, higher mortgage payments caused by upward interest rate adjustment, unemployment or reduced income, job relocation, business losses, or death of spouse.

Advantages For Both Buyers And Sellers

The process of short sale foreclosure is beneficial to both the seller and the buyer of the property. The seller can avoid foreclosure and save his credit record from being tarnished with this noting. He can also avoid the trauma of going through with this undesirable process. Gradually, if he is able to rebuild his financial situation, he can buy another house and avail himself of a mortgage facility, as his credit report will be clean. He should avail himself of short sale services of a local realtor to go through the process smoothly. The seller should ensure that the selling price is inclusive of the agent's commission.

Buyers of short sale foreclosure are generally investors who find it to be a golden opportunity to buy a property at almost a throwaway price, since they will have to pay only the balance of the mortgage amount. Moreover, the property will be in good condition because the original owner will be occupying it until the time of its sale.

A reliable realtor does not charge any fees from the homeowner. The short sale process normally takes between three and six months for coming to an agreement with the lender. It might take even longer, as most lenders have multi-tiered bureaucracy and taking the help of a competent realtor to maneuver your way through will be beneficial to the homeowner.