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Short Sales Are Quickly Becoming The Default Choice To Stop Foreclosure.

The short sale, used primarily to stop foreclosure, is becoming a very popular field in real estate especially when interest rates are climbing.  Homeowners faced with the prospect of losing their home are turning more and more to this option. Short sales are also becoming more and more popular for real estate investors when buying a foreclosure just because of the huge discounts they offer.   

Short sales are negotiated by the seller directly with the lender, and they require the seller to provide information as to why they cannot find a way to make normal payments. Foreclosures are expected to increase nationally as many adjustable rate mortgages written during 2004 and 2005 reach their first-reset marks. Short sales are complex and likely to become more complex as lender deal with more and more of then in the coming months and years.  Many homeowners who took advantage of the inflated real estate prices to dig deeply into their home’s equity are now feeling the pinch. 

Lenders 

Lenders know that repossessing the home will cost them tens of thousands of dollars to maintain, refurbish, market and sell, with no guarantees that it will recoup the same amount as from a short sale.  Lenders want to see that the homeowner is not able to pay their bills and are in need of relief; short sales are a last resort option and are only necessary when faced with foreclosure or bankruptcy.   Lenders want to get rid of distressed properties as soon as possible, but they aren’t going to sell them for ridiculously low prices.   Sellers In a perfect situation sellers want to get as much for their homes as possible, and certainly don’t want to sell for less than market value, or sell for less than what they paid for it. This may quickly turn into a desperate situation however when unforeseen events transpire that create financial hardships. Job loss, long-term illness, or a dramatic rise in living expenses are just a few reasons homeowners suddenly find themselves with a cash flow problem. The fortunate seller who convinces their lender a short sale is the best way to solve this problem needs to be aware of one possible downside. Some lenders may claim whatever debt they’ve forgiven as a loss on their taxes and issue a 1099 form to the seller for the amount.  

Foreclosures 

Foreclosures are growing as expected and continue to increase nationally as many adjustable rate mortgages written during 2004 and 2005 reach their first reset marks.  Short sales are expected to increase proportionally as a direct result. Foreclosure practices, including pre-foreclosure short sale workouts, may differ from lender to lender, state to state, and in some cases, from county to county. 

Short sales have become fairly common practice in the real estate market these days and anyone who has completed one knows that you had better be prepared for rough riding trying to convince the lender you story is compelling enough for them to accept the lesser amount from the sale of the property. Armed with this information, you can decide whether short sales are an avenue worth exploring to avoid foreclosure.

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A Well-Written Hardship Letter Is Pivotal For Short Sale Success

Few people purposely wish to suffer through the pain and humiliation of losing a home through foreclosure. There are many alternatives to bankruptcy and stopping home foreclosure for owners unable to keep their mortgage payments current. One such option is known as a “short sale.” It means a lender is willing to accept less than the total amount owed on the loan. One key element involved in the short sale process is the hardship letter.

Most mortgage companies or lenders require the hardship letter pursuant to a short sale. The homeowner should not waste this valuable opportunity to appeal to the lender for another chance. It is also prudent not to waste time and engage in finger-pointing as it will only make your already tenuous situation worse, and lender may well deny your request for a short sale. In the hardship letter just present the facts clearly and above all else be honest. The hardship letter must be able to prove the situation that caused you to fall behind was temporary and you are now in a position to make your payments on time. The excuse for falling behind must be legitimate and provable. Situations such as job loss, prolonged personal illness, or a death in the family are all acceptable reasons to fall behind on your mortgage payments. 

Who is responsible for writing the hardship letter to creditors?

A homeowner may write the hardship letter themselves, hire someone, or get help from a real estate investor if one is involved. The real estate investor can offer valuable experience and samples of hardship letters for the homeowner to create their letter. Ultimately it is the homeowner who is responsible for the letter, its content and accuracy of information.

Hardship letter writing tips.

You are going to have to get personal in your hardship letter. At this point in the process the homeowner should be fairly immune to any embarrassment involved with telling their story. This is also the homeowner’s opportunity to implore upon the lender to accept the smaller amount from the short sale. A well-written hardship letter is moving and personal and contains full back up proofs of the hardship.The more time, and the better the hardship letter is composed, the easier the short sale is going to be. The best hardship letter will convince the creditors that the homeowner’s situation is genuinely distressing and the lender would be better off accepting the lesser amount than pursuing a foreclosure.

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