Tag Archives: short sale vs foreclosure

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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Short Sale Vs Foreclosure

April 13, 2011

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If you find yourself in the position of having to decide between letting your lender foreclose on your home or attempting to sell in a short sale, below are some pros and cons for each option. A short sale is a great idea in the current real estate market.

Foreclosure

This is a legal process used by your lender to reclaim your property and sell it to pay off your loan. Some are opting to simply let the banks foreclose on their properties and walk away from the loan. If you have the means to continue paying your loan you should continue to pay. A foreclosure will reflect more negatively on your credit report compared to a short sale.

The foreclosure route is the shortest path to ridding yourself of your problem but also the most damaging.

Short Sale

You can request permission to conduct a short sale from your lender at any time. You do not need to be in default to receive permission however you will most likely need to meet several other criteria before you are granted permission. The obvious benefit to this is that you can get out of your current loan early if you are ok with taking a loss.

A short sale also will not hurt your credit score as bad as a foreclosure. If your credit is in ok condition you could possibly purchase another home immediately after your short sale.

At the moment the government is not taxing any debt forgive by your lender during a short sale. All the more reason to seriously consider going the short sale route.
A foreclosure is just all around a bad thing to have on your credit report and will hinder future home purchases for years to come. A short sale can be lengthy and bothersome but it will save your credit and allow you to purchase another home when you feel you are capable of fulfilling your payments.

 

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