For anyone that knows that a foreclosure is just around the corner,
a short sale should at least be considered. A short sale can protect
you in a few ways that might just help your credit, as with a short
sale, a foreclosure will not be placed on your credit report. A short
sale does not always wipe the slate clean, though, you may still owe
the lending company money. The reason is that the lending company will
be accepting less than what is owed on the home and in some cases will
expect you pay the difference. This is where negotiations come into
play.
You may be confused when it comes to talking with your lending company;
however, you should know that every type of lending company has a
department that works directly with their customers to negotiate short
sales. The department is usually known as loss mitigation. Talking with
department before you receive a foreclosure notice may not be your best
option, as they will more than likely turn a blinds eye to your
problem. The reason this is true is that all lending companies would
like to receive the money that you borrowed including all the interest,
this is the way they make money.
After you have received a notice of default, you should then make an
appointment with the loss mitigation department of your lending
company. In some cases, you may wish to bring with you an attorney to
ensure your rights are not violated. In most cases, the process is easy
as the lending company normally has a predetermined criteria for short
sale negotiations. A lending company, by law, has a right to deny a
short sale, this is where you will need your negotiating skills to kick
in. this is one reason having an attorney by your side will do wonders.
The lending company will of course want to receive as much money as
they possible can, however, most will take reasonable offers.
If you have found a person that wishes to purchase your home at a lower
amount than what you owe, you may be able to negotiate with the lending
company, but if the amount of money is quite a bit lower than the
amount you owe on the existing loan, you may have a hard time
convincing the lending company that this is a good deal. If you cannot
afford to pay your mortgage payments, you are headed toward
foreclosure, then you must do something or the foreclosure will be on
your credit report and you will have a hard time buying a home for a
very long time. On the other hand, the lending company does not wish to
lose money. If they can sell your home at auction, or put it up for
sale and gain more money than you are offering, they will more than
likely deny your short sale offer. Be prepared to negotiate and provide
the lending company with a reasonable offer.
