Know your options when facing foreclosure short sale

When you are in default or in the verge of default in paying your mortgage, you have two options to choose from: foreclosure or short sale. In some places within California there are two types of foreclosures, judicial foreclosure and non-judicial foreclosure.

If you really have to decide right away, please see a real estate lawyer or a tax accountant before taking any steps. But before consulting an expert, give me a chance to tell you what I know about foreclosure short sale.

Let’s start with short sale. Short sale is an alternative to foreclosures. It can happen only if your lender agrees and when the value of your house is less than your mortgage. Let’s say Matt has a $150,000 mortgage but his house is only worth $60,000 if we calculate using current standards, then he’s qualified for a short sale. Just remember that a short sale is not a money making option. You will get zero money and zero equity because all of the money from the sale will be used to pay off your lenders.

Be informed that short selling means you will sell your property at less than market value so the proceeds of the sale will all go to your lender to satisfy your debt.

The problem with short sales and non-judicial foreclosures is asset protection. If you try for a short sale or non-judicial foreclosure, your lender will most likely go after your remaining assets in order for you to pay for your debt.

This is where a regular judicial foreclosure comes in. When you’re in default, just let your property go and the court will handle all the legal and financial proceedings in relation to your property.

I will not lie to you. Judicial foreclosure can take significantly longer than short sale and non-judicial foreclosure. It’s also much more complicated and expensive than any other proceedings. The only benefit of a judicial foreclosure is the fact that you can protect your remaining assets (like your second house) from your lenders. When the bank sells your house in a public auction, your lenders can’t go after you for any subsequent financial losses.

I have tons more of information about foreclosure short sale. Just sign up for my newsletter and you’ll get to download my exclusive 25 page report with the inside scoop about short selling. You can also get my in-depth how-to video about short selling and how you can protect your credit.

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