Goldie Sommer is an attorney and a real estate agent who specializes in short sales and foreclosure negotiations.
If you own a home, it is usually easy to borrow money using the home as collateral. It is also relatively easy to borrow money when buying a home. Banks are willing to lend a bigger percentage of the asking price to residential property buyers than to commercial property buyers because of the lower risks. Sometimes it is so easy to borrow money that homeowners borrow more money than they can pay back to the bank. A person may also lose his or her job, face a medical condition, or a number of other unfavorable life circumstances. When a homeowner stops making payments, both the homeowner and the bank have a problem.
Banks and other lenders are not interested in foreclosing properties. They are not in the property management business. They are in the business of lending money. In many cases, banks lose money when they foreclose loans. They then need to maintain the property, before selling it, which is also not something they are interested in doing.
When a homeowner loses a house in foreclosure, his or her credit score takes a big hit. When the homeowner can borrow again, the interest rate is usually much higher than before. Banks view loans to those who had a foreclosure in the past as extremely risky. This being said, the homeowner may not practically experience the negative effects of foreclosure on the credit score for some time. However, the effects of losing a family home and having to move abruptly are usually traumatic to any person.
Regardless of the reasons for the foreclosure, the key to a successful transaction is how you deal with the distressed owner and the issue. This is something Goldie Sommer experienced time and time again during her career.