Regardless of whether you find yourself in the role of a prospective buyer or a borrower turned seller, it’s crucial to recognize that both short sales and foreclosures come with their distinct sets of advantages and challenges.
What Is A Foreclosure In Front Royal, VA?
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.
Foreclosure is commonly triggered by a borrower’s failure to meet mortgage payment obligations, leading the lending institution to acquire ownership of the property and evict the borrower. Following this, the properties are typically either auctioned or sold through conventional real estate channels. The aftermath of foreclosure adversely impacts the borrower’s credit score, impeding the ability to obtain mortgage financing for a prolonged duration.
It’s worth noting that foreclosure processes may vary depending on the state of residence. For comprehensive details on the foreclosure procedures specific to your state, you can refer to the resources available on 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 debts secured by liens 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 certain instances, borrowers and lenders may mutually consider a short sale as a viable alternative. A short sale involves selling the property for an amount less than the remaining mortgage balance. Whether the borrower remains liable for the unsettled balance, referred to as the deficiency, depends on various factors.
However, executing a short sale often entails a prolonged process, particularly if multiple lending entities hold stakes in the mortgage. Securing unanimous agreement among all involved parties is essential for proceeding with the sale, and the prospect of a successful deal may be jeopardized if even one lender dissents.
Short Sale vs Foreclosure – Your Options
While both options can have ramifications, a short sale often has less of an impact on the borrower’s creditworthiness. A foreclosure could impact a borrower’s credit score by 300 or more points, where a short sale may only dent 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.
As numerous Americans continue to grapple with an economy still grappling to fully rebound from the 2008 financial crisis, many find themselves struggling to meet their monthly mortgage obligations. For borrowers facing difficulties in timely payments, the decision between enduring foreclosure, opting for a short sale, or exploring alternative avenues such as swiftly selling their property in Front Royal, becomes a pivotal and often straightforward choice.
At times, lenders may demonstrate willingness to collaborate with borrowers in facilitating a short sale, motivated by the desire to circumvent the expenses and lengthy procedures associated with foreclosure proceedings.
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.
- Attempt a short sale or other programs your lender 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 Five15 Properties 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. Allowing the house to slip into foreclosure stands as the ultimate recourse, representing the most dire scenario imaginable. This course of action carries severe consequences, including detrimental effects on your credit score and the potential for remaining indebted to the bank even after the foreclosure process concludes.
By being well-versed in the available choices, you might sidestep a substantial blow to your credit rating, thereby preserving the potential to acquire a new residence once your circumstances ameliorate. The presence of a foreclosure on your credit report renders the prospect of purchasing a new home exceedingly challenging for a duration spanning 5 to 7 years. Hence, if circumstances permit, opting for a short sale can emerge as the preferable course of action.
Have a pending foreclosure? We’d like to make you a fair all-cash offer on your house.