When a homeowner defaults on a mortgage, the lender begins to consider options for recovering the money owed. They may negotiate with the borrower, adjusting payments or interest rates to keep him in the home. But in many cases, either a foreclosure or a short sale takes place.
What Is Foreclosure?
If a homeowner in default does not attempt to negotiate with his mortgage lender, or if negotiations fail, the home will usually go into foreclosure. This involves the lender obtaining a court order of repossession. The bank then puts the property up for sale.
When the home is sold, the lender receives the proceeds up to the amount owed plus repossession and selling costs. If there is any money left over, it is distributed to other lienholders. Once all leinholders are paid in full, if there is still money left, it goes to the former homeowner.
In general, foreclosure is a long, drawn out process. It usually begins when the homeowner is three months or more behind on mortgage payments. The lender issues a Notice of Default, and may demand repayment of the loan in full. If the homeowner does not meet the requirements of the Notice of Default, the lender can begin court proceedings.
What Is a Short Sale?
In a short sale, a home is sold for less than the outstanding balance of the mortgage. This is often used as a means of preventing foreclosure. But in rare instances, a short sale may take place even if the borrower is up to date on his payments.
The idea behind a short sale is to recover as much of the money owed as possible and avoid the expense and hassle of foreclosure. It is up to the lender whether or not a short sale is allowed. If they believe that the proceeds from a foreclosure minus the costs will be less than the proceeds of a short sale, they will usually allow it. Otherwise, they will go forward with foreclosure.
Which Is Better?
Neither a foreclosure nor a short sale is desirable. Both result in the homeowner losing his home, and both can have similar effects on one’s credit score. But in some instances, one or the other may be considered the lesser of two evils.
When undergoing foreclosure, a homeowner may have the opportunity to stay in his home for several months before he is forced to vacate. The time frame varies according to state laws, but it is almost always longer than that of a short sale. Short sales are set up to be completed quickly, so the homeowner will need to leave quickly.
But if you play your cards right with a short sale, you could potentially escape with less damage to your credit. If the lender strongly prefers a short sale, they may be willing to agree not to report the short sale to the credit bureau if you consent to it. Your chances of achieving this will be better if you hire an attorney to help negotiate.
A foreclosure is something we all hope to never experience. A short sale isn’t any better. If you find yourself facing the possibility of either of these, talking honestly with your lender may win you some other options. It’s certainly worth a try.
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Online auctions have become a popular shopping destination for everything from clothes to cars. You can even buy real estate through online auction sites! Those who deal in foreclosures have found that there are plenty of them to choose from on sites such as eBay.
But buying online comes with a great deal of risk. Here are five rules to live by when shopping for foreclosures via online auction.
1. Understand that you can’t be sure what condition the property is in without seeing it in person. Photos could be taken in such a way as to downplay negative aspects, or even altered to hide them. If you want to be sure that you’re not buying a property that is worthless, you’ll have to travel to wherever it is and inspect it or hire someone you trust to do it for you.
2. Check the reputation of the auctioneer. There are some auctioneers who are very professional and honest in their dealings. And then there are those who just want to make a quick buck by any means necessary. Do some research on the seller. You may be able to find information about high-profile firms by doing a Google search and checking with the Better Business Bureau. If you’re buying through a site like eBay, check the seller’s feedback rating and ask for verifiable testimonials.
3. Read the terms of the auction carefully. By bidding, you agree to those terms in the event that you win the auction. Make sure you understand everything perfectly and agree with it. If you have any questions or doubts, contact the seller to clarify.
4. Find out as much as possible about the property and come up with a maximum price you’re willing to pay based on that information (or the lack thereof). Whatever you do, stick with that price. Bidding wars could drive the price higher and higher, and in the heat of the moment it’s easy to get carried away and bid more than you intended. Resist the urge and remind yourself that there will be other auctions.
5. Keep in mind that you’ll have to pay up immediately. Once you’re declared the winning bidder, you’ll usually have no more than a few days to make a deposit. You may have to pay the entire balance in that length of time, or the seller might give you a week or two. If you’re really lucky, he might offer partial owner financing. But as a general rule, you should be prepared to pay right away.
There are great deals to be found at online foreclosure auctions. But there are also plenty of scams and shams. By following these simple rules, you can greatly reduce your chance of getting burned.
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Money isn’t always readily available for such things as expensive outings and activities for you and your family. With the uncertainty of the economy these days, more and more families are searching for free, frugal and money-saving ideas in order to keep the family having fun together without breaking the bank. How about trying some of these options to keep your family activities happening without the costly aspect some choices may have.
1) Your local community may have a “Parks and Recreation” website or booklet available to residents. These usually include a variety of activities in different price ranges, from free to inexpensive as well as those with a higher fee. There are quite often long lists of activities which fall into the free or inexpensive range, such as community walks through area parks and trails, family cycling days or even free family days at the local indoor pool.
2) Plan regular family visits to your local library. With a little bit of planning ahead of time, each visit can be focused on a particular subject such as traditions from around the world, new crafts you can learn as a family or any other topic which can be learned about as a family. Check out books related to your choices to bring home so you can experience different cultures together. Most libraries also have DVDs or videos you can borrow for free or a very small fee. They may have some which can assist you with this family project.
3) Occasionally your community may provide a fundraising concert or performance in a park or community center. Frequently the entry fee will be a low price for an entire family, or possibly even a donation of canned goods for the local food bank. For this small donation your family could enjoy an evening of music from local talent, or benefit from the amusement of a community fair. Pack your own refreshments to bring along and you have a full day of fun for the price of a few cans of imperishable goods.
4) Hold family read-aloud days when the weather isn’t being cooperative. Rainy days, a good book and being snuggled together under a warm blanket with popcorn for a snack is a great way to bond as a family while waiting for nicer weather when you can do something else outdoors.
5) Visit a museum or zoo on family days or half-price days. What can be more fun than learning new things together while visiting a new museum exhibit, or trying to imitate the faces the monkeys at the zoo are making? Many libraries now allow you to borrow or rent passes to these locations for a very minimal price. They include admission for the whole family, and are normally valid for more than one museum or activity in your area.
If family funds are limited, it doesn’t necessarily mean fun and activities need to be limited as well. All it takes is a little bit of planning, and there is a wealth of activities you and your family can partake in while sticking to a frugal or free rule. The most important aspect of it all is spending time together, not how much or how little you spend while you do it.
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