by Victoria Hunter

Created on: January 05, 2011

If you find yourself facing foreclosure, for whatever reason, the first thing you need to do is stay calm. Only when you are calm will you be able to effectively deal with what you are facing and choose the right option for yourself and your family.

Okay, so what are the options when one is faced with foreclosure? Let’s take a look at the most popular and the pros and cons of each.

Short Sale
Despite what you may have heard, banks love this option. So do real estate agents. The banks like it because the house will bring more money in a short sale than it will at auction. Plus, YOU do all the work of selling the house. They just sit back and entertain the offers. Real estate agents like short sales because they are many times shut out of foreclosure sales. If a house doesn’t sell at auction, many loss mitigators-the folks employed by the banks to dispose of the real estate they take back in foreclosure-have their own short list of agents they prefer to work with in different areas of the country. When a homeowner decides to short sell, the first thing he or she will do, usually, is look for a real estate agent.

Out of all of the options a foreclosing homeowner has to choose, a short sale is probably the worst. Why? You don’t get to keep the house. You don’t get any money from the sale of the house. Finally, you do all the work to sell, essentially, someone else’s home (the bank’s). To top it all off, your FICO score takes the same hit it would if you foreclosed.

Short sales=not a good idea for the homeowner, although great for banks and real estate agents.

Mortgage Modification
Now, we’re getting closer to something a homeowner should consider. A loan modification is a process whereby the lender modifies the loan, either permanently or temporarily, to make the home more affordable for the homeowner. Sometimes there is a short-term reduction in the rate. Other times, there is a forbearance-a time period to allow the borrower to catch up on missed payments. The best place to get information about the mortgage modification process is at the makinghomeaffordable.gov Website.

Deed-In-Lieu Of Foreclosure
The deed-in-lieu is a simple procedure. You give back the deed and the lender leases the house to you for a set period of time, usually 1 year, at current market rent. This process allows you to remain in the home while you find other housing arrangements without the fear of the constable or sheriff coming to the door to evict you.

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