Shorts Sales vs Foreclosure
Short sales vs. foreclosure is a hot topic in the world of real estate. These two options might be the only thing left for borrowers struggling to make ends meet. Both can resolve financial challenges or create an entirely new set of problems.
The primary difference between short sales vs foreclosure is with short sales homeowners have the opportunity to sell their property for less than is owed on the mortgage note. Borrowers must meet certain criteria to obtain short sale approval from their lender.
Although each mortgage lenders establishes short sale protocol, most require the same criteria to obtain approval. The three primary requirements include:
1. Borrowers must be at least 31 days delinquent on their mortgage note, but not entered into the foreclosure phase.
2. Borrowers must owe more on their mortgage note than the appraised value of their property.
3. Borrowers cannot own assets which could be used to repay the mortgage loan.
Banks require borrowers to undergo a financial audit and require submission of a short sale packet. Lenders generally require payroll records, previous years' tax returns, list of income and expenses, bank statements and property tax records.
With short sales, borrowers are allowed to sell their property and walk away from their home. Most banks require borrowers to have a buyer in place before granting short sale approval. Others will allow borrowers time to list property through a realtor and provide two or three months to sell the home.
Before entering into an agreement it is important to determine what type of shortsale your lender offers. Two types exist. One can set you free and the other can send you into financial bondage.
The first is known as 'Payment in Full without Pursuit of Deficiency Judgment'. With this type of agreement, banks accept the sale price as payment in full toward the mortgage note. The second is referred to as 'Deficiency Judgment'; meaning the bank will issue a judgment against the borrower for the difference between the sale price and loan balance.
Deficiency judgments remain on your credit report until paid in full. For many, this can take years to repay and will have devastating effects on their ability to obtain credit in the future.
Payment in full remains on credit reports for seven years. However, if borrowers are able to get back on track with their finances, they can apply for another mortgage loan within a year or two.
Foreclosure can be a long drawn-out process or can be expedited quickly. Much depends on the policies of the lender. In most cases, foreclosure occurs within six to nine months. It can occur as quickly as three months or take as long as eighteen months.
During this time, borrowers can reside in the home even if they are not making mortgage payments. Once the appropriate documents are filed, the Sherriff can seize the property within 72 hours.
Foreclosure remains on credit reports for ten years. Once the property is seized by the bank, it is placed for sale through public auction. Banks can issue deficiency judgments against foreclosure homes; holding the borrower responsible for repayment of the deficiency amount.
Short sales vs. foreclosure options should be weighed carefully prior to making a final decision. If necessary, seek the advice of a real estate attorney or short sale specialist. I invite you to review our short sales vs. foreclosure article library to help you make an informed decision.
If you need to sell your real estate quickly to satisfy a short sale agreement, I might be interested in buying your property. Submit information about your home via the "we buy houses" form. If it fits our criteria, I will contact you to discuss available options.
Published on August 02, 2009 at 03:32 AM