There are many rumors out there and bad information on what is and isn’t in today’s market. This is when a lender agrees to take less than what’s owed on the property. Most people are amazed when they see that banks will negotiate debt when a property is inevitably headed towards foreclosure. Borrowers do need to prove some type of financial hardship in most cases. Many people tend to think that foreclosures and pre-foreclosure properties are the same, but that is not the case. On a short sale the borrower or person in foreclosure is the owner of the property. BANKS DO NOT OWN SHORT SALES. This can also known as a pre-foreclosure sale. The seller is participating to avoid a costly foreclosure from appearing on their credit ultimately, which can be very damaging. A foreclosure will report to a borrower’s credit and will have negative effects for quite a while, many say up to 7 years. They can also avoid deficiency judgments by negotiating a settled account on their credit. Banks do not like short sales, but they prefer them over a foreclosure.
Banks are not in the business of foreclosing on properties, but in the business of lending money. The costs of the foreclosure process, directly and indirectly, are what cost the banks money. As long as a borrower in foreclosure can show the bank or lien holder that they will net more money accepting a lesser pay off vs. going to foreclosure, the majority of banks in this market will approve the deal. In our current market this is another way to mitigate the bank’s loss. They will encourage this option instead of foreclosing on the property.

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The possibility of bankruptcy is very real. If you think this could never happen to you, think again. In fact millions of Americans have already filed bankruptcy at one point in their lives and most of them never expected that possibility either. The truth is, everyone can be at risk of bankruptcy even those who have lots of money in the bank. Take a look at the following most common reasons why people end up filing for bankruptcy:Even rich people are affected by unexpected events that are beyond control. There may suddenly be an illness in one of the member’s of the family and their finances can slowly decline in just a matter of months or even weeks. Natural disasters like hurricane, earthquake, and other accidents can happen at the most unexpected times. The change in the economy or the loss of job are all major events in life that can have a huge impact on a family’s financial status. Knowing that the unexpected events can strike at any time, it is only fitting to do the necessary preparations. Do you set aside some of your money in preparation for such emergencies? Or do you spend every penny of your monthly income, confident that you’ll have enough salary the next month? Do you have a savings fund you can rely on in case you got laid off from work or in case you got sick and unable to work for some months? Financial experts recommend having fund in your savings account which is enough to last your whole family for at least six months. This buys you some time if drastic changes in your lifestyle needs to be done.

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