The Benefits of Avoiding Foreclosure

The Benefits of Avoiding Foreclosure

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How You Can Avoid Foreclosure

Are you in danger of losing your home, your good credit rating, and the life you once knew? Things may never be the same again for you after a foreclosure. Actually, if you already know that you are on the verge of foreclosure, from this point on your life will be much different. We are going to be very up front here from the beginning. The only way you can avoid foreclosure is if you can bring a real estate investor a profit.

You may be thinking ‘forget it’, if I’m going to lose, I may as well take the hit to my credit and my life and try to pick up the pieces. Truth be told, you won’t have any ‘pieces’ to pick up. Starting over will require that you start over from scratch. You might not make any money by obtaining a real estate investor to flip your house, but at least you won’t lose your good credit or your dignity.

Minimize Credit Score Damage

If you want to eventually purchase another home, you absolutely must have good credit. Selling your home for less than what it’s worth will still leave you with a lower credit score. Yet, it’s much better than taking a hit for the entire amount.

Instead of going completely bankrupt, be willing to let your credit score decrease by 100 points. That’s the average amount that credit is usually decreased due to a short sale. You may be able to avoid a deficiency judgment altogether –which is what lenders may do to you (unless you live in California) if you still owe the bank money.  

Walking Away

Another great benefit of avoiding foreclosure is you can eventually walk away from the ‘contract’ you signed. You can only walk away if you do not owe the bank any money. If your home is worth $250,000 to the lender and you sell it for $225,000, there is a $25,000 difference.

Attempt to negotiate a waiver of the lender’s right to seek a deficiency judgment. If the lender agrees to the waiver, make sure that the paperwork for this waiver is included within the short sale agreement. The agreement should say something such as: “This transaction is in full satisfaction or paid in full for the debt” or “The lender waives it’s right to any deficiency judgment”.  

Just remember to keep an open mind. Short sales are risky, but definitely not as risky as foreclosure and bankruptcy. You have more options than you think you have when it comes to avoiding foreclosure. The above may not seem beneficial to you and your financial health at the beginning, but give it some time and you will be pleasantly surprised.

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