Loss Mitigation Blog

Your finances are under a severe strain and the only alternative you see is a foreclosure! Wait have you seriously considered the Short Sale Option for loss mitigation. In a Short Sale loss mitigation you basically sell your home for less than what you owe on it and turn the proceeds over to your lender as payment for your loan.

What is Short Sale Loss Mitigation?

Short Sale means selling your house or property for less than your mortgage balance, and forward the proceeds to your lender as payment. The remaining amount is usually forgiven in a real estate short sale, so your mortgage is considered paid in full. A short sale is usually given to homeowners whose property value has dropped so much that they now owe more on the home than it can sell for.

Why Short Sale?
Is Short Sale a suitable loss mitigation option for you? How can you benefit from a short sale when, just like in a foreclosure, you still lose your home in the end? Here is the answer:

You get to control the sale.
In a foreclosure, your home is basically seized and auctioned off, leaving you out of the whole selling process. That’s not the case with a short sale loss mitigation. All your bank has to do is approve the buyer's offer - the rest is all up to you. That way, you get to choose who gets to keep your home, what gets sold, what you get to keep, and which costs to cover.

You don't have to pay the costs.
Often, after a foreclosure, the lender can still go after the borrower for the amount they lost in the process. In a short sale, this is usually optional. Your bank may require you to shoulder some of the costs (usually when they see you have other assets to draw from), but generally, it's a matter of negotiating the terms with the short sale representative.

You can reduce credit damage.
There will still be some damage to your credit report, but it won't be as drastic as a foreclosure. Short sale loss mitigation takes 100-200 points off your rating, whereas a foreclosure drags your score down by up to 400 points. Most of the damage comes not from the short sale itself, but from the default period that most banks require for qualifying borrowers.

You can buy a new home sooner.
Under Fannie Mae rules, you can qualify to buy a new home only two years after a short sale. Foreclosures usually take five to seven years, and even then, not all lenders will grant you a mortgage with the foreclosure mark still on your record. If you do a short sale without a 60-day default, you can even buy a new home as soon as the deal is closed.

You don't get the foreclosure stigma.
Foreclosures are negatively viewed not just by the credit bureaus, but by society as a whole. You may have trouble getting even small personal loans from the bank, or even be refused for a job because of it - and it all lasts up to ten years. A short sale loss mitigation option doesn't carry the same social stigma and is usually cleared within five to seven years.

How To Do A Short Sale?
The first step is to call your lender and ask about your loss mitigation options. You can opt for your bank's in-house short sale loss mitigation program or take part in the government's loss mitigation program like Home Affordable Foreclosure Alternatives (HAFA). You can also hire a real estate agent or attorney to represent you. They have the negotiation skills and knowledge about the processes to improve your chances of getting approved.

Buying Short Sale	Selling Short Sale
1. Hire a Realtor	1. Find & Verify Property's True Value
2. Get Pre Approved	2. Calculate & Add Other Costs
3. Look For Properties	3. Determine Total Proceeds
4. Make an Offer	4. Contact Lender
5. Negotiate Price	5. Advertise & Market Your Property
6. House/Property Inspection	6. Evaluate & Negotiate Offers
7. Close the Sale	7. Sell Your Property

More on Short Sale Loss Mitigation:
Short Sale Requirements
Why Banks Prefer Short Sale?