Foreclosure happens when a homeowner cannot meet their monthly mortgage payments.  After missing a couple of consecutive payments to your lender, they will begin the foreclosure process on you.  There are many options available to homeowners to try and use to stop foreclosure.  Today we area going to look at the short sale option and see if it is actually a good solution for the homeowner.

Avoiding foreclosure is your main concern when exploring your options.  Keep in mind that foreclosure is one of the worst-case scenarios, so even if one option is at the end of the list, it should still be above foreclosure.  Foreclosure will not only have you lose your house, but the lender can get a judgment against you for the arrears you owe plus their costs for the foreclosure process.  Also your credit report will be affected for at lest seven years after the foreclosure.

A short sale is where you would sell your home for less than what you owe your lender; the biggest problem you will face is getting your lender to agree to a short sale.  It does not hurt to ask, because most lenders want to avoid the foreclosure process as well; it is timely and takes a lot of money for the lender to go through with the foreclosure.  This is why if you are in bad financial situation you need to pursue this option early on and not at the last minute — this way, the bank will consider saving costs.

Short sale does have some disadvantages as a solution to avoid foreclosure, number one being that you still lose your home.  Also it will have some negative effect on your credit, not as bad as a foreclosure, but it could lower it as much as 200 points.  As long as you keep one or two credit cards, keep them current and paid off, you can build that credit back up quite quickly, though. You used to be taxed for difference between the mortgage balance and the amount realized from the short sale, but with the mortgage forgiveness debt relief act of 2007, this problem was eliminated.

If you are stressing about a possible foreclosure and have already missed one payment, with no possible ideas of how you going make the next one, then you should really give the short sale option a good consideration.  Act quick on it, if you think it is a viable option, remember it is better than the alternative — foreclosure.

If you are still unsure that a short sale is the right answer for you, speak to people that are knowledgeable in the field.  Talk to a local real estate agent; you would be surprised at how much they can tell you. And remember, they are in the field and know a lot more than one would think.  Also talk to a local foreclosure attorney, as soon as you miss your first payment, try and get some people are you side working for you and looking for the quickest and best solution for your situation.

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