Alternatives to Foreclosure

2013-11-10T09:00:00Z Alternatives to ForeclosureMichelle Krueger Times Correspondent
November 10, 2013 9:00 am  • 

If you’re having trouble paying your mortgage and owe more than your home is worth - you may be able to sell your home for less than you owe, avoid foreclosure, and make a fresh start.

A short sale happens when a seller owes more on their home than what they can sell it for (commonly referred to as upside down). As the owner of the home, you can make an arrangement with your lender to sell the house for less than is owed. If that is the case, the bank then agrees to accept the loss in order avoid foreclosure (note: this is a general short sale practice, keep in mind that individual situations differ and each lender handles them differently).

It’s also important to understand how a short sale transaction differs from a foreclosure. In the foreclosure process, the homeowner falls way behind on their payments and the bank repossesses the house and sells it. In almost all cases, the bank pursues the homeowner for any loss, often necessitating a declaration of bankruptcy.

One key element of a short sale that many people are still not always aware of is that you can arrange a short sale even if you have not fallen behind on your payments but are in danger of being late. Growing consumer knowledge of this fact has been said to be a major contributor to the number of foreclosures declining significantly since they peaked a few years back.

Another reason why more people may now be inquiring about pursuing a short sale, according to Pete and Renata LaSalle, managing brokers of the Redkey Realty Leaders LaSalle Team in Valparaiso, is the FHA’s recent announcement of new guidelines that enable borrowers with a short sale in their credit history to possibly purchase a home in as little as 12 months following that short sale.

“The new rule requires documentation of an economic event precipitating the short sale - something like loss of a job - and demonstration of significant recovery from the event, the equivalent of 12 months of clean credit history,” Pete explained. “Those with a foreclosure - instead of a short sale - must wait at least 3 years before obtaining an FHA insured mortgage.”

“There are always going to be hardships,” Renata added. “If people even anticipate having trouble making mortgage payments, it’s best to start investigating their options early on. At the same time, they should also know it’s never too late.”

For example, the LaSalles are currently working with a homeowner who was not aware of his options and simply abandoned his property a few years ago.

“Now, the condition of the property has obviously changed,” Renata said. “Even so, we are working through the short sale process and look forward to closing the sale. I can’t tell you how many times this particular client has said, ‘if only I would have known about this sooner.’ There should never be any reason why you would want to abandon your property. With a short sale, you can live in the home while going through the process. It provides the homeowner time to regroup, and it’s a better alternative for the property and neighborhood than foreclosure.”

Trained through the National Association of REALTORS® Short Sales and Foreclosure Resource certification program (SFR®), the LaSalles have gained a great deal of hands-on experience working with distressed sellers over the last few years and helping them get on with their lives.

As a result, they are now part of a Chase national initiative.

“Chase Priority Partners are part of a network of select real estate agents across the country who are experts trained in the short sale process and have demonstrated their proficiency for working with distressed homeowner,” Ullysses Soto, REO-ABA Specialist in the Mortgage Banking Department of Chase, said.

“The overall purpose of this initiative is to help homeowners by providing them with choices when it comes to the professional assistance they need to see all the options for their particular circumstance. Every real estate market is different, so these local partners are our local experts on the ground - like Pete and Renata in Lake, Porter and LaPorte counties.”

“In all short sales, the seller’s lender has to review and approve or decline any offer,” Pete explained. “Chase is well known among real estate agents for closing their short sales in a timely manner. With the 30-day wait period, short sales definitely take longer than traditional sales, but they are not taking as long to close as they once did. There’s really not a definitive answer on how long it will take to close a short sale, and we’ve found that it’s dependent on the time of year, the bank and so on.”

“All the major lenders in the industry want to prevent foreclosure,” Renata added. “It’s important for people to understand they have options if they know they are going to be late with their mortgage payments. It’s a common theme for people to be embarrassed about their situation and not want to reach out for help. We’re here to tell them they are not alone, and there are options.”

“Our goal is ultimately to make the short sale process as easy as possible,” Soto said. “Homeowners can always choose any real estate agent they would like to list their home. But, if they would like assistance, we will provide referrals to three Chase Priority Partners in their area that are educated on the process.”

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