It wasn't until the recent mortgage crisis that homeowner or lenders were very accepting of the short sale process. Traditionally thought of to be an equal to foreclosure, many homeowners never considered pursuing a short sale as an alternative. Having viewed the ultimate goal as keeping the home, many saw short sales as an equally negative outcome of mortgage debt.
Homeowners On Board
As the housing and mortgage lending industry has changed dramatically over the last few years, many homeowners have been forced to seek out options for relieving their mortgage debts. Unfortunately, not all of the available options are always possible. For example, loan modifications are a highly sought after option when mortgage debts become unbearable. Allowing the homeowner to both keep the home and get caught up on payments, a loan modification is the option of choice. However, strict qualification standards and stubborn lending practices have made securing one difficult for too many.
These days more homeowners are now volunteering for short sales rather than risk the damaging effects of a foreclosure. Although homeowners may still have to walk away from the home, protecting their credit and future chances at securing another mortgage have become top priority. Future lenders look more favorably on a short sale than a foreclosure because it demonstrates the homeowner's intent and effort in resolving their debts. However, we can't deny that even a short sale is more damaging than a loan modification or keeping out of financial hardships. But when times get tough, the focus shifts from desired goals of keeping a home to necessary goals of getting out with minimal damage.
Lenders On Board
Lenders are in a more favorable position when it comes to being choosy about mortgage debt solutions. After all, they are not necessarily required to bend over backwards for an underwater homeowner. Although they must demonstrate some efforts towards helping find a resolution, they ultimately hold all of the power in negotiations. Contrary to the belief of some, lenders do not prefer a home entering foreclosure. While there are some lenders that may be able to recoup their loss through a federally insured mortgage, this is a rare case and the lender still has the bulk of the hassle when collecting on the debt.
These days more lenders have become partial to a short sale whenever the homeowner does not qualify for a loan modification. Why? Less effort on their part. Allowing the homeowner to sell the home and present offers that they may pick and choose from helps to maximize the chances the lender recoups as much money as possible. In a foreclosure, the lender is stuck with the burden of selling the home and sitting on the home for months without any payment towards the property; whereas they simply have to accept or reject offers that are brought by the homeowner. With less effort on their part and an average of 30-45 percent more in sale value brought by a short sale, more lenders are accepting the idea.
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