I doubt many people would argue with the fact that having your property foreclosed upon is the equivalent to financial suicide. If you have been watching TV or reading the paper you know it is a hot topic lately. But did you know that the banks would do just about anything NOT to foreclose on your property? They don't want to foreclose because it ends up cost them a lot of money compared to the alternatives.

Foreclosure is a process that can take up to a year or more and begins when a borrower is 60 days past due on their payment and Notice of Deficiency (NOD) is filed. It ends when the bank finally takes possession of the property. Usually when a borrower has missed two or more mortgage payments they are behind on everything else and have divorced themselves from their situation. They don't open their mail or answer the phone.

But it is best to stay in contact with the creditors especially the mortgage holder. If you have experienced a short-term income problem it is possible to have your loan reworked so that the payments you are behind on get added to the end of the loan and or have your payments reduced for a period of time so you can catch up. Each lender is different, but most of them want to get non-performing loans back into current status and they will work with you.

If you are at the point where it is no longer possible for you to afford what you bought and there is no equity in the property, many lenders will accept what is known as a Short Sale. The lender will allow you to sell your property for less than what is owed. The exceptions are usually insured loans such as FHA loans. Two things can happen afterwards. The lender will forgive the short fall or seek a deficiency judgement against you. There are tax and legal implications involved in a short sale and you should seek advice from a CPA and an attorney but both scenarios are better then foreclosure. Not only that but if the lender will seek a deficiency judgement after a short sale they will certainly do so after a foreclosure sale and the deficiency will likely be more because the sale will take place at auction and legal fees will pile up.

In the event your credit is still good it is possible to do a Work Out on the loan. This is were the lender will allow the property to be sold for less than what is owed and the deficiency converted to a non-secured promissory note paid out over a period up to 15 years and the lien removed from the property.

With millions of adjustable rate loans increasing in the upcoming months and so many people who bought 2 or 3 years ago and seen the values of their property decrease since then, lenders are gearing up to accept these short sales and streamlining the process. However, there is a right way and a wrong way to go about it. Hire an agent who is familiar with the process and can negotiate with the lender on your behalf. Also seek advice from an attorney and accountant.

Tom Day, Re/Max in Motion - Pompano Beach and Coral Springs, FL

www.TomDayProperties.com