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Could a short sale help a homeowner facing foreclosure?

Even though the housing crisis appears to be in the country's rear view mirror, that does not mean that homeowners here in Texas or elsewhere in the country stop having trouble making their mortgage loan payments. Job losses, serious medical issues and other circumstances could still make it nearly impossible to make these important payments. When a homeowner faces foreclosure, exploring the option of a short sale might be worth the time.

It is entirely possible that a Texas homeowner could owe more on his or her mortgage loan than the home is worth. This means that selling the home for the fair market value will leave the homeowner short when it comes to paying off the mortgage on the property. When a short sale is approved, the lender agrees to accept less than the amount due. After closing, the lender ordinarily releases the seller from any further liability for the remainder of the mortgage loan, but this does not always happen.

Many homeowners would rather accept this scenario rather than a foreclosure, and many lenders would agree. In a foreclosure, the lender essentially "repossesses" the home through a legal process. The lender requests that the court allow it to evict the current homeowner and sell the home at an auction in the hopes of recovering at least a portion of its investment. If no one purchases the property, the bank owns it, which is not an outcome anyone wanted.

For this reason, lenders may be willing to accept the terms of a short sale in order to avoid owning the home. A homeowner would rather short sale the home instead of having a foreclosure on his or her credit report. Additional problems could arise when a short sale is not possible. Homeowners in this situation could consult with an attorney to determine what other legal options are available, such as a deed in lieu of foreclosure or bankruptcy. Even before deciding to embark on a short sale, obtaining further information regarding all options available may be beneficial.

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