Probably the worst thing you can do if you have equity in your home is to let it go to foreclosure. If you have equity in your home and can sell it for a good price before it is foreclosed, you might be able walk away from your transaction with money in your pocket and only minimal damage to your credit. Selling your home can be an especially good choice if you have a lot of equity in your home but insufficient income to make payments under a loan modification plan. You can usually sell your home for more than it would make at a foreclosure sale or auction. Foreclosed properties are often considered unpopular and risky investments, especially in states where the former owner has a right to redeem the property (which we’ll cover later in this chapter). Consequently, the pool of buyers for foreclosed homes is limited, and prices tend to be lower than for other homes. Selling your home yourself will likely benefit you and your lender.
WORKING WITH AN AGENT
When you must sell your home quickly to avoid a foreclosure, strongly consider hiring a professional real estate agent. A local REALTOR® or other competent agent will understand the ramifications and requirements of foreclosure in your jurisdiction. Additionally, a real estate professional has access to sophisticated marketing techniques and networking to aggressively sell your home quickly and at the best price. Your agent can perform a market analysis to help set a realistic and appealing listing price for your home and determine whether the home’s sale value is likely to satisfy your debt to your lender.
THE "SHORT SALE" ALTERNATIVE
If your mortgage is “underwater” (the home is worth less than the amount you owe on it), then a short sale might be a good option for you. In a short sale, the lender agrees to accept a payoff that
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