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Short Sale V Foreclosure

February 20, 2012

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This has become a common topic these days. People are practically wondering whether to go for a short sale or a foreclosure when it comes to the sale of a house. The problem is that this comes when you are in financial difficulty. The process can prove difficult. But you need to understand and give a distinction between the two in order to make a proper decision.

Short selling is a process that involves three major parties: the lender, seller and buyer of the house. A short occurs when the lender of a mortgage sells the house a price relatively lower than the market value of the house at the time of the sale. On the other hand, foreclosure is a legal process where the lender attempts to recover the balance of a loan from a borrower that has stopped making payments by selling the asset of the borrower that was used as collateral for the loan.

In underscoring a short sale v a foreclosure, you need to take the view point of a lender, seller or buyer. However, we shall look at it in more general terms:

Effect On Credit Score- your credit score after a short sale basically depends on the report given to the credit reporting agencies. In most cases, it doesn’t affect your credit score. However, it can be slightly affected by just a few points depending on the report given. On the other hand, a foreclosure affects up to 300 points of your credit score.

Waiting Period Before Taking Another Mortgage- in the case of a short sale, one has to wait for up to just two so that they can apply for another mortgage loan at a very reasonable interest rate. This is not the same case with a foreclosure where one has to wait for a period of between 3 to 7 years in order to apply for another mortgage. The exact period is determined by circumstances such as illness, death, an accident that may result in severe injury or a job transfer.

Payments during the Process- a number of payments take about 3 to 12 months clear. You may cease to make any payments for the house such as rent or mortgage loan during the short sale process as you continue to live in the same house. This can allow you to solve your financial problems in the short run. However, this is not the case with a foreclosure where you have to make all the payments as the process goes on.

Qualification for some Closing Incentives- you may qualify for some incentives from the lenders and the government of up to $35,000 as a closing balance in both a short sale and a foreclosure. This money could help you a lot to move and relocate.

Generally, a short sale has fewer damaging effects than a foreclosure. A short sale also seems to harbor a number of advantages for all the parties involved while it is more disadvantageous to the seller in the case of a foreclosure.

Overall, it is better to find out the agreement of the parties involved. There are other cases where the lender may decide against a foreclosure.

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Instead of Foreclosure, Opt For A Short Sale

September 28, 2011

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In these difficult economic times you may find that it’s difficult to pay your loan in a timely manner. In the worst case you will feel humiliation when you receive a notice from your lender forcing you to move out of your home and they may not even give you much time. That doesn’t sound any good to me so what can you do to avoid such a scenario? First it’s important to understand that a foreclosure has many consequences in addition to losing your home. Your credit rating will suffer for as many as 7 years causing you to pay high interest rates and difficulty financing another home in the future. Future lenders will know you lost a home previously to a foreclosure so they may think twice about working with you.

So what can you do to avoid all of these negative consequences? A Short Sale.  This is a great procedure which allows you to sell your home below the market value. Their are many stipulations involved and you always must seek permission form your lender to sell in a short sale. Your lender has final word. When opting for the short sale your credit will suffer BUT not nearly as bad as it would you let the bank foreclose. Short Sale is the proactive choice.

Since the short sale process can be difficult its always best to hire a short sale specialist to assist you with all of the paperwork. You must keep in mind that the person your hire to help you will be dealing with things you may not totally understand to trust is important. If they miss a step or do not get back with the bank in a timely manner then that could set back your process considerably.

You can learn a lot about the intricacies of this process on the internet. It’s important to educate yourself as much as possible to help make things go as smoothly as possible. Another thing to keep in mind is that the process can be long and may even fall apart if the bank decides they dont want to short sale your home.

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