I am continually asked by clients on our listing appointments, "what are the benefits of doing a short sale vs letting the property go through foreclosure?" Without knowing the seller's financial situation, this can be difficult to answer because sometimes it's better to let the property go to a foreclosure because of California's Anti Deficiency laws and the protections they provide. 

With that being said, in summary a seller can benefit from a short sale in the following ways.

* The most important, a seller can avoid having a "foreclosure " on their credit report.

*According to recent Fannie Mae lending guidelines, you can be eligible to qualify for a Fannie Mae    backed loan two years after the short sale completes. 

*Assuming the seller is already not making mortgage payments, they can continue to live in the property and not make payments during the short sale. The lender of Record actually prefers that the borrower continue to live in the property. Statistically, occupied homes tend to be better maintained then vacant properties, making the property more marketable.

*Most lenders feel that staying in the house is the  "right thing to do" when in default. They tend to feel walking away from the house is irresponsible and unfair to the lender.

*Sellers often do not understand that when doing a short sale, the senior lien holder will pay for the costs of the sale.(i.E, commissions,escrow fees, title insurance, deliquent property taxes, ect.)

Here are the risks associated with Vacancy that lenders are faced with and why they prefer the borrower to stay in the home during the short sale process.

Vacancy risks can be broken down to three (3) primary categories.

1.  Maintenance:

Maintenance issues on vacant properties stack up quickly. Lenders take on the expense of securing & maintaining the the property ahead of the foreclosure. Lenders hire costly preservation companies to maintain the property.

2. Theft & Vandalism:

Vacant properties are easy target for thieves looking for appliances and/or for the copper out of A/C units and pipes.  Also vacant properties are a magnet for squatters and or juveniles that cause thousand of dollars of damage, all costs the lenders assumes in a foreclosure. Municipal fines can run as high as $1000 per violation, per property, per day for properties not maintained.

3. Vacant Property Ordinances:

 Cities and counties across the country have drafted vacant property ordinances aimed at two things:

 a) Reducing neighborhood blight by pushing lenders with the threat of financial penalties, to secure, monitor and maintain vacant bank owned properties.

b) Generating revenue, municipalities are looking for ways to make up for revenue short falls they face.

Each vacant property ordinance is different. It is estimated that there are over 5,000 distinct & separate vacant property ordinances across the country.

If your struggling with your mortgage, you owe it to your self to understand what pre foreclosure options you have.  Jennifer and I have the training & experience to educate homeowners on the options they qualify for.  If your looking for ways to minimize your financial loss and limit the damage to your credit history you need a trusted professional, trained in the pre foreclosure process.  Jennifer and I have obtained our Pre Foreclosure Specialists certification and the Certified Distressed Property Expert designation.

Also if you are struggling with a Wachovia, World Savings and Golden West mortgage Jennifer and I have a short sale manager we can put you in direct contact with that will explain your pre foreclosure options with these loans.