Whether you’re a buyer or a borrower/seller, a short sale, and foreclosure each present different advantages and difficulties.
What Is A Foreclosure In Raleigh, Durham, Wake Forest, NC?
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. 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.
A home is typically foreclosed on when a borrower fails to make mortgage payments. The lending institution assumes ownership and possession of the property, evicting the borrower. These properties are then sold at auction or more traditional means utilizing the service of real estate agents. A foreclosure can damage the credit rating of a borrower, and make it very difficult to obtain a mortgage for many years. In addition, if it is sold for less than you owe on your mortgage with fees and penalties, the bank can still pursue a debt collection against you for the difference that is owed.
Foreclosure can vary 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 home owner).
So, what is 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 some cases, a short sale is an option agreed upon by borrowers (The home Owner) and lenders. In a short sale, the home is sold for less than the outstanding balance of the mortgage, typically with a realtor. The unpaid balance (known as the deficiency) may or may not still be owed by the borrower. This is what they may try and collect from you via a debt collection.
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. The short sale process can take several months, the good news is while it is being negotiated you can stay in your home.
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. The short sale process, while not paying off the loan completely, would show as late payments on your credit. The foreclosure would show not only the late payment, but also a repossession. Some banks can denied you further credit for 10 years
As many Americans struggle with an economy that has yet to completely recover from the COVID shut downs, folks are having a hard time making monthly mortgage payments. Some home owners have been on a COVID furlough program, but these programs are coming to an end. The economy is becoming more unsettled as we move into possibly another recession.
Choosing between being foreclosed and initiating a short sale (or a 3rd option… selling your Raleigh, Durham, Wake Forest house fast )is an easy choice for a borrower having troubles paying their mortgage on time. One of these options will be ideal for you.
Sometimes, lenders 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.
- 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 Coastal Oak Ventures 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. It’ll harm your credit and you could still be left with money owed to the bank even after the foreclosure is finished.
By knowing your options, you may be able to dodge a significant impact on 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.
We have worked with many home owners over the years to help with a foreclosure situation. The best think is to keep the communication going with the bank and start to work through solutions early. If you wait too long there maybe nothing anyone can do. Once you have a foreclosure sale the bank gets harder to work with and you may lose your home. Often times if you are within 2 weeks of your sale date, we maybe unable to help. It is important to get ahead of the situation if you want to sell.
Have a pending foreclosure? We’d like to make you a fair all-cash offer on your house.