However, foreclosure victims who wish to save their homes should take every step necessary to prevent the foreclosure. If they are intent on keeping the house, then there are numerous options to stop foreclosure that may be considered. Unloading the property, though, is a much better alternative to being forcefully removed by the sheriff during the eviction process. But once homeowners have attempted every solution that they are qualified for (and even some they are not), it may be time to move on and consider selling the house through a short sale.
The best way to sell a house is generally through a local Realtor with low fees who understands the situation or for the homeowners to list on their own. That way, commissions can be kept as low as possible, allowing for a more attractive selling price and for the homeowners to keep as much of the proceeds as they can. Selling the house and ending up with even a small amount of equity is always a better result than listing the house for too high of a price, not being able to sell at all, and having the bank take the property to a sheriff sale. When this happens, the homeowners typically end up with nothing, as the house will not sell for an amount necessary to pay off the defaulted amount.
If the homeowners do decide to attempt selling the house, the mortgage company may give them extra time to find a buyer. It is important to contact the lender once all other options have been exhausted, so that they can postpone a sheriff sale or hold off on any other foreclosure proceedings.Mortgage companies are more interested in getting their loan paid off, and it is in their interest to allow for extra time to list a house on the open market. If the house was taken to sheriff sale and the bank was the high bidder, they would end up listing the house anyway, after the eviction process had been completed. The homeowners listing the house while they are still the owners may cut down the time that the bank has to deal with the property, as well as ensure their loan is paid in full or for an acceptable amount.
Often, though, properties in foreclosure do not have enough time to sit on the market for months with an asking price equal to the value of the home. This is one reason that banks will consider short sales in many instances. A short sale is an arrangement whereby the mortgage company accepts less than the total owed on the loan, and is usually approved if the value of the property has decreased, and there is no way the sellers would be able to get a buyer to pay more than the market value. Even in cases where the loan is not higher than the value, banks may accept a short sale, because there is a high possibility of them losing even more money if the house has to be sold at sheriff sale and then sits on the market for months.
Homeowners who attempt a short sale and find a buyer need to be aware that they will most likely end up with nothing for the sale. Other than the foreclosure process being stopped and being able to make a clean break with the property, there is no benefit to a short sale. The lender will certainly not want to see the homeowners getting some sort of financial benefit beyond a few hundred or a thousand dollars for moving expenses. Furthermore, any debt that the bank forgives (the difference between what the homeowners owe and what the bank actually accepts as a payoff) is counted as income to the foreclosure victims. This means that they may have an extra tax liability at the end of the year because of the short sale.
Thus, a short sale can be a remarkable solution for homeowners who have tried various options to stop foreclosure and have been unsuccessful. It provides a solution even when selling the property for exactly what is owed is not possible -- the bank can actually accept less than what is owed and help the homeowners to unload the house and avoid a full foreclosure. But the drawbacks of the short sale process should also be considered; namely, that the homeowners will not be able to benefit financially from the sale, and they may even have a tax liability for the short sale. However, when all else has failed and the lender is willing to work with the foreclosure victims, a short sale is a much better solution than a sheriff sale and eviction.