WHAT IS THE DIFFERENCE BETWEEN SHORT SALES VS FORECLOSURES?
Taking a mortgage for your house is exciting, and why should it not be? You are no longer paying rent but working towards owning a house. It is important to have a strategy on how you will pay the mortgage instalments.
But at times, things do not go as we had planned, and you might find that you are struggling to pay the instalments. If so, you might be looking for the options that you have. When doing your search, you will likely meet with these two terms; short sale foreclosure.
If these terms are new to you, it is vital to understand what they are and how to navigate through the situation. Here is what you need to understand about a short sale versus a foreclosure.
FIND OUT WHAT SHORT SALE ENTAILS
There are some situations where homeowners could owe more on the mortgage than the house’s market value balance. In such instances, the best option you have when selling your house is the short sale. This is where you sell the house for the market value and give the money to the lender. Since you will not get the total amount you owe on the mortgage, the bank should accept less than the value owed.
* However, for a house to undergo a short sale, two things have to happen;
* The homeowner must be so far back on rent and are not in a position to pay back.
The housing market might have gone down to the extent that the house value is less than the outstanding balance.
If any issues happen, the bank and the homeowner will try to short-sale to avoid foreclosure. But you should realize that both the homeowner and the mortgage provider have to agree on the price. At times, the homeowner might be on board with the offer they get, but the lender is unwilling to accept it. That is why most people consider short sales complicated.
FIND OUT WHAT FORECLOSURE ENTAILS
A foreclosure also happens when the owner of the home is unable to make the mortgage payments. When that happens, the lender will take the home from the owner and sell the house to recover the money owed. The process is complex since it starts with the eviction of the homeowner. After that, the lender will attempt to sell the house by hiring a real estate agent or going through an auction.
During a foreclosure process, the buyer does not have any say or rights to the house. They are not involved in any way in the selling of the house. If you are behind in the mortgage payment for three months or more, it might be you are up for foreclosure. You should understand that the foreclosure processes will vary from one state to another. Thus, when falling behind on your mortgage, take the time to research the laws of foreclosure in your state.
The aim of foreclosure is for the lender to liquidate the house as fast as they can. That is the reason they take a short time before the sale is made. These homes can be auctioned and sold to the highest bidder.
THE SIMILARITY BETWEEN SHORT SALE AND FORECLOSURE
With these two options that lenders use to recover their money when the homeowner is no longer in a position to pay their mortgage rate, you might be wondering if there are any similarities between the two. However, other than the fact that the homeowner will be forced to leave their property before they are ready, these two house selling options are quite different.
SHORT SALE VERSUS FORECLOSURE
THE TIME IT TAKES TO SALE
With the short sale, you will find that this is a long procedure that involves numerous paperwork. The procedure might take over a year before it is completed. On the other hand, foreclosure is a fast selling option, and banks will try to speed up the process to get as much money as possible.
EFFECT ON CREDIT RATINGS
When you use a short sale to sell your house, it will not hurt your credit rating. Even after a homeowner goes through the short sale, they might still be eligible to purchase another home immediately. But that is not the case with the foreclosure. If your home gets a foreclosure, it will impact your credit report. If this happens, you might have to wait up to seven years before you can purchase a home.
THE PARTY SELLING THE HOUSE
When dealing with the short sale, the house owner will be handling the transaction. The aim of selling the house is to pay the bank the amount they owe. But with the foreclosure, the bank is the one that sells the house, and the house owner will not have any rights during the process.
ARE THESE THE ONLY OPTIONS AVAILABLE?
Both the short sale and foreclosure sound like a nightmare. The situation is worse since you were not planning to sell the house in the first place. In case you find yourself in this situation, you can find cash buyers for your home. These are the buyers who will buy the house within a short time, regardless of the condition.
The cash buyers will hire experts to evaluate your home’s value and then tell you the much they will be willing to pay. If you agree, you can have the sale closed in as little as two weeks. If so, you will not have to deal with the stress of a short sale or foreclosure. However, if you choose the cash buying option, you need to take the time to find a reliable company, and that will offer you value for your money. When you choose the right company, you will soon put all the stress involving mortgage behind. The best part is that when you settle your financial issues, you will still be in a position to apply for a mortgage again.
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