Short Sale in Florida- Alternative to Foreclosure

If you are on the verge of a financial crisis and see the gloomy idea of a foreclosure slowly becoming a reality then a short sale may be your ticket out of trouble. A short sale is the term used to describe a property that is sold for less than the market value to prevent it from being foreclosed. This alternative option is now becoming the preferred choice of thousands that have defaulted mortgage payments and want to save themselves from the wreck that a foreclosure can cause.  You may also qualify for a financial incentive if you fall under one of the four categories of home owners that is covered under the Home Affordable Foreclosure Alternatives (HAFA) program.

The HAFA program is a branch off from the Home Affordable Modification Program (HAMP) and is extended to homeowners that: applied to the HAMP program and were not successful with their loan modification application, request a short sale or deed-in-lieu of foreclosure, are facing serious financial problems that have prevented them from making two consecutive payments to their loan balance and possess an unpaid loan balance that is less than $729,750. Under the HAFA program, homeowners that are eligible can receive up to $3,000 to cover the costs associated with displacement.

It must be pointed out that while short sales is a 'win' situation it is not fully approved until the lender agrees to the terms. In many cases there are lenders that will put up resistance against a short sale. Foreclosure on the other hand carries a lot more disadvantages for the lender, borrower and nation on a whole. With this in mind, some lenders will be willing to bend to the thought of accepting a short sale instead of foreclosure, because they see the short sale as a tangible return. Foreclosure usually involves a long process of getting the house up for sale and waiting until potential buyers appears to buy the house. In many cases this can take months and lenders find that lots of money is tied up in foreclosure properties.

Another point worth mentioning is the effect of a short sale on one's credit score compared to foreclosure. The effect will be based on how many days in arrears the borrower is far behind before getting a short sale approved. Experts believe that arrears that are up to 30 days late can reduce one's credit score by up to 100 points whereas 90-days arrears can reduce it by 135 points. The situation with foreclosure is a bit grimmer with homeowners running the risk of losing up to 160 points on their credit scores. The disadvantage with this is that despite losing the house and going through the humiliating experience of not being able to keep up with monthly mortgage payments, the effects of a bad credit score plague people for years to come. The larger the dip in one's credit score the harder it is to take out a loan and to get back one's life on track.

As with many issues that revolve around real estate it is always best to get help from a real estate agent that specializes in short sale. This is not a transaction that should be done alone and in many cases you will need to hire a real estate lawyer as well.  You should hire an expert in short sale that is clear about how to approach lending institutions with a proposal. If this fails then you will be thrown against the wall with future foreclosure. 

More Articles »