ANSWERS: 1
  • After making the decision to unload your house at auction, you may be wondering what recourse you have if the property does not sell. The fact is that there are other strategies to employ, including a short sale, contract for deed and--depending on your circumstances--a property surrender to your mortgage lender.

    Short Sale

    A person typically places a house up for auction because of a desire to get out from underneath the property sooner rather than later. For example, you may be struggling to keep pace with mortgage payments. In addition, your property may be underwater--meaning the value of the home is less than the outstanding mortgage loan balance. An option to pursue is what is known as a short sale. Through a short sale, you negotiate with the lender to reduce the outstanding balance on the home mortgage loan to a point below the value of the property. Gaining this agreement, you are able to put your property on the market at a lower sales price that will be more attractive to a potential buyer. Lenders are persuaded to discount a loan for a short sale to avoid the prospect of filing a foreclosure case in the future, a legal action that is costly and time-consuming.

    Contract for Deed

    Electing to consider selling your home on a contract for deed is another option. Through a contract for deed you essentially take the place of a home mortgage lender. The buyer makes monthly payments directly to you. The typical agreement includes a date certain in the future at which the buyer obtains her own home mortgage loan and makes a final balloon payment to you. Provided the monthly installment from the purchaser is enough to satisfy the current mortgage payment on the existing loan (together with any other expenses) you are able to effectively deal with the financial issues related to the property.

    Property Surrender

    If you are feeling intense pressure to rid yourself of the financial responsibility of the house and if you know a foreclosure is on the horizon, you can approach your mortgage lender about a property surrender. Through this process, you give ownership of the property to the lender upon a written agreement that you fully are relieved of any further responsibility or liability for the existing mortgage loan. A surrender makes sense if you are in a situation where you are underwater on your existing loan.

    Source:

    "Real Estate Law"; Robert J. Aalberts & George Siedel; 2008

    "Real Estate Law"; James Karp & Elliott Klayman; 2005

    "Avoid Foreclosure: How to Avoid And Prevent the Foreclosure of Your Home"; Steve Mount; 2009

    More Information:

    Department of California: 2010 Real Estate Law

    Washington State Department of Financial Institutions: Prevent Foreclosure

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