Did you know that whether you’re a buyer or a borrower / seller or a lender, a short sale and foreclosure each present different advantages and difficulties.
What Is A Foreclosure In Salt Lake City Utah?
In simple terms… “A foreclosed home is one in which the owner is unable to make his mortgage loan payments and the bank repossessed the home” (source). If you stop making your house payments… your lender has the right to foreclose on your property so they can attempt to recoup their money that was lent to you.
Most homes are foreclosed on when a borrower doesn’t make their mortgage payments. The lending institution assumes ownership and possession of the property, evicting the borrower. These houses will be sold at auction or more maybe a traditional means by using a real estate agent to list and sell the home. A foreclosure can damage the credit rating of a borrower, and make it very difficult to obtain a mortgage for many years.
Depending on the state that you live in… a foreclosure can work in different ways. Check out the foreclosure process information over here at the HUD Government website.
What Is A Short Sale?
In a short sale, the home is still owned by the borrower.
The definition of a short sale is… “A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of amount owed against the property, and the property owner cannot afford to repay the liens’ full amounts and where the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt” (source: Wikipedia)
In some cases, a short sale is an option agreed upon by borrowers and lenders. In a short sale, the home is sold for less than the outstanding balance of the mortgage. The the amount that is not paid (known as the deficiency) may or may not be owed by the home owner/borrower.
This option typically takes some time, as a few different lending institutions may own the mortgage. All parties who have a stake in the property must agree to the terms of the sale, and a potential deal could fall through if even one lender doesn’t agree.
Short Sale vs. Foreclosure – Your Options
Both options will have different ramifications, a short sale often has less of an impact on the borrowers creditworthiness. Did you know that a foreclosure could impact the borrower’s credit score by more then 300 points, where a short sale may only ding the credit score by 100 points.
Borrowers who are foreclosed on are often ineligible to purchase another home for 5-7 years with a traditional mortgage, where under certain circumstances, a short sale borrower can purchase immediately.
Sometimes life isn’t fair and can throw us a curve ball. The economy that has yet to completely recover from the 2007 crash, people are having a hard time making monthly mortgage payments. Having the option of being foreclosed on and starting the short sale process (or a 3rd option… selling your Salt Lake City house fast to us )is an easy choice for a borrower having troubles paying their mortgage on time.
Most of the time, banks are willing to work with borrowers to complete a short sale, to avoid the fees and time consuming process of conducting a foreclosure.
Our suggestion is always this.
- Talk with your lender and discuss ways that they can work with you on your loan. We offer this service where we can help guide you in the right direction if you run into issues with your lender… just reach out to us on our Contact page and we’ll discuss your situation.
- Look into doing a short sale or other programs your bank may have that forgives part of your loan, creates a new / more affordable monthly payment so you can get back on your feet, etc.
- If the bank isn’t willing to work with you very much… your best option may be to sell your house. Work with a local real estate house buyer service like YourPriceMyTerms.com to sell your house fast for an all-cash offer. If you’re interested we can look at your situation and make you a fair offer on your house within 24 hours. Just fill out the form on our website over here >>
- Foreclosure. Last resort is to let the house fall into foreclosure. This is the worst possible scenario. This method will damage your credit and you could still owe money to the bank even after the foreclosure is finished.
Know your options, you may be able to avoid damage to your credit score, allowing you to purchase a new home when your situation improves. A foreclosure on your credit report makes that possibility extremely difficult for 5-7 years, so if you have the opportunity, a short sale can be the better option.
Have a pending foreclosure? We’d like to make you a fair all-cash offer on your house.