Know your options when facing foreclosure short sale

When you are in default or in the verge of default in paying your mortgage, you have two options to choose from: foreclosure or short sale. In some places within California there are two types of foreclosures, judicial foreclosure and non-judicial foreclosure.

It's best that you consult a real estate lawyer or a tax accountant before making any life changing decisions. But in the meantime let me tell you what I know about foreclosure short sale. I'll explain the differences between short sale, non-judicial foreclosure and judicial foreclosure.

You and your lender can agree to a short sale when the value of your house or property is less than your debt. For example if Luke has a $200,000 mortgage but his house is only worth $100,000 based on current market value, then he's qualified for a short sale. Short selling will not earn you any money or equity. In fact all the proceeds of the sale will be used to pay for your debt.

Aside from short sales you can also opt to a foreclosure. As I said earlier there are two kinds of foreclosures, judicial and non-judicial foreclosure. Let's discuss non-judicial foreclosure first. With non-judicial foreclosure your lender (most likely your lender's agents) will act as a trustee and sell your house in a privately run auction. In essence you'll be selling a deed of trust so this process will not involve the court in any way.

With non-judicial foreclosure your lender or your lenders agent will act as a trustee and sell your house in a privately run auction. This process will not have the court involved in any way. The problem with non-judicial foreclosure is the fact that you will not be exempt from any liability from financial responsibilities more important than your mortgage.

The thing about short sales and non-judicial foreclosures is about liability. If you get into short sale and non-judicial foreclosure, your lender will not have any prohibition to go after your assets just to satisfy your debt. However, with judicial foreclosure, you can let the court handle all the legal and financial aspects in the proceeding and that's the end of it.

The big down side of a Judicial foreclosure is that it can take longer than a short sale or a non-judicial foreclosure. It's also a very complex and expensive proceeding than any of the two. But if you have a second house or any remaining asset, you can protect it from your lenders only by going through judicial foreclosure.

To know more about foreclosure short sale, credit protection, zero taxes and how to avoid personal liability, sign up for my newsletter right away. You will get my exclusive 25 page report and how-to video containing very comprehensive information about the ins and outs of short selling.

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