Whether you are a buyer or a borrower/seller, a short sale and foreclosure each present distinct advantages and difficulties.
What’s A Foreclosure In San Antonio, Texas?
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 paying your mortgage your lender has the right to foreclose on your house so that they can attempt to recover their money that has been lent to you.
The lending institution assumes ownership and repossesses the home, evicting the borrower. These properties are then sold at auction or more conventional means using the service of a real estate agent. A foreclosure will harm the credit rating of a borrower, and also make it quite difficult to obtain a mortgage for several years.
Depending upon the state that you reside in… a foreclosure may work in various ways. Check out the foreclosure process information 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).
Sometimes, a short sale is an option agreed upon by lenders and borrowers. In a short sale, the house is sold for less than the unpaid balance of the mortgage. The outstanding balance (called the deficiency) may or may not be owed by the borrower.
This option typically requires some time, as several different lending institutions may own the mortgage. All parties that have a stake in the property must agree on the conditions of the sale, and a possible deal could fall through if one lender doesn’t agree.
Short Sale vs Foreclosure – Your Options
While both options can have ramifications, a short sale often has less of an effect on the borrower’s creditworthiness. A foreclosure may impact a borrower’s credit score by 300 or more points, while a short sale might only dent the credit score by 100 points.
Borrowers that are foreclosed on often are ineligible to purchase another house for 5-7 years using a conventional mortgage, where under certain circumstances, a short sale borrower can buy instantly.
As many Americans continue to struggle with an economy which has yet to completely recover from the 2008 crash, people are having a hard time making monthly mortgage obligations. Selecting between being foreclosed on and initiating a short sale (or a 3rd option… selling your San Antonio house fast ) is an easy choice for a debtor having problems paying their mortgage on time.
At times, creditors may be willing to work with borrowers to complete a short sale, to avoid the penalties and time-consuming process of conducting a foreclosure.
Our suggestion is always like this…
- Speak with your lender and discuss ways that they can work together with you in your loan. We provide this service where we can help guide you in the right direction if you encounter problems 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 might have that forgives part of your loan, generates a new / more affordable monthly payment so that you can get back on your feet, etc.
- If the bank isn’t willing to work together with you very much… your very best option may be to sell your house. Work with a local real estate property buyer service such as Lone Star Real Estate Solutions LLC in order to sell your house fast for an all-cash offer. If you’re interested we’d be happy to look at your situation and make you a fair offer on your home usually within 24 hours. Just complete the form on our website over here >>
- Foreclosure. Your last resort is to allow the house to fall into foreclosure. This is actually the worst possible scenario. It is going to harm your credit and you might still be left with money owed to the bank after the foreclosure is completed.
By understanding your options, you may have the ability to dodge a substantial impact on your credit rating, allowing you to buy a new house when your situation improves. A foreclosure on your credit report makes that possibility extremely difficult for 5-7 years, so in the event that you’ve got the chance, a short sale could be the better choice.
Do you have a pending foreclosure? We’d love to make you a fair all-cash offer on your home.