Can
a home seller sell
a home for less
than its mortgage?
A:
Yes,
in some case you
can sell your
home for less
than what you
still owe on the
mortgage. But
it is complicated
and depends on
the lender. This
situation is known
as a "short
sale." Sometimes
a lender will
be willing to
split the difference
between the sale
price and loan
amount, which
still must be
paid.
A
short sale may
be complicated
if the loan has
been sold to the
secondary market
because then the
lender will have
to get permission
from Fannie Mae
or Freddie Mac,
the two major
secondary-market
players.
If
the loan was a
low-down-payment
mortgage with
private mortgage
insurance, then
the lender also
must involve the
mortgage insurance
company that insured
the low-down loan.
Q:
How
does someone sell
a slow mover?
A:
Even
in a down market,
real estate experts
say that price and
condition are the
two most important
factors in selling
a home.
If
you are selling
in a slow market,
your first step
would be to lower
your price. Also,
go through the
house and see
if there are cosmetic
defects that you
missed and can
be repaired.
Secondly,
you need to make
sure that the
home is getting
the exposure it
deserves through
open houses, broker
open houses, advertising,
good signage and
a listing on the
multiple listing
service (MLS)
and on the Internet.
Another
option is to pull
the home off the
market and wait
for the market
to improve.
Finally,
if you have no
equity in the
house and are
forced to sell
because of a divorce
or financial considerations,
you could discuss
a short sale or
a deed in lieu
of a foreclosure
with your lender.
A
short sale is
when the seller
finds a buyer
for a price that
is below the mortgage
amount and negotiates
the difference
with the lender.
In
a deed-in-lieu-of-foreclosure
situation, the
lender agrees
to take the house
back without instituting
foreclosure proceedings.
The latter are
radical options.
Your simplest,
and in many cases
most effective,
option is to lower
the price.
Q:
How
does a home go into
foreclosure?
A:
Foreclosure
proceedings usually
begin after a borrower
has skipped three
mortgage payments.
The lender will
record a notice
of default against
the property. Unless
the debt is satisfied,
the lender will
foreclose on the
mortgage and proceed
to set up a trustee
sale.
Q:
When
does foreclosure
begin?
A:
Lenders
will initiate foreclosure
proceedings when
homeowners become
delinquent in their
mortgage obligations,
usually after three
payments are missed.
The lender will
then notify the
buyer in writing
that he or she is
in default. The
lender can request
a trustee's sale
or a judicial foreclosure,
in which the property
is sold at public
auction.
A
borrower can cure
the default by
paying the overdue
amount and the
pending payment
after the notice
of default is
recorded, usually
no later than
a few days before
the property's
sale.
Some
sales allow the
successful bidder
to take possession
immediately. If
the former owner
refuses to vacate
the premises,
the court can
issue an unlawful
detainer that
allows the sheriff
to come out and
evict them.
Borrowers
should do everything
they can to avoid
foreclosure, which
is one of the
most damaging
events that can
occur in an individual's
credit history.
Q:
How
long do bankruptcies
and foreclosures
stay on a credit
report?
A:
Bankruptcies
and foreclosures
can remain on a
credit report for
seven to 10 years.
Some
lenders will consider
an borrower earlier
if they have reestablished
good credit. The
circumstances
surrounding the
bankruptcy can
also influence
a lender's decision.
For example, if
you went through
a bankruptcy because
your employer
had financial
difficulties,
a lender may be
more sympathetic.
If, however, you
went through bankruptcy
because you overextended
personal credit
lines and lived
beyond your means,
the lender probably
will be less inclined
to be flexible.
Copyright
2006 Inman News Features
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