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 Missouri?
In simple terms… “A foreclosed home is one in which the owner is unable to make his or her mortgage loan payments and the bank repossessed the home” (source). If you stop making your house payments… your lender can foreclose on your property so they can attempt to recoup their money that was lent to you, even if they’ve already made their money back from the years of interest you’ve paid them.
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.
Depending 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 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 and lenders. In a short sale, the home is sold for less than the outstanding balance of the mortgage. The unpaid balance (known as the deficiency) may or may not still be owed by the borrower.
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.
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.
As many Americans struggle with an economy that just got back on it’s feet and is already heading back into a downturn, many people are having difficulty making monthly mortgage payments. Choosing between being foreclosed and initiating a short sale (or a 3rd option… selling your St. Louis house fast )is an easy choice for a borrower having troubles paying their mortgage on time.
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 a foreclosure assistance service AT NO COST and NO up-sells. We can not only help guide you in the right direction, but can even negotiate directly with the lender if a short sale is needed… No need to pay a short sale negotiator or pay a Realtor.
- Attempt a short sale or other programs your lender may have that forgives part of your loan, creates a new / more affordable monthly payment (loan modification) so you can get back on your feet, etc. Just know that this can take some time. We can buy short sales and are experienced in negotiating these as well. A deed in lieu of foreclosure is sometimes another option to consider, but we personally believe other options
- If the bank is NOT offering to help (which is often the case)… your best option may be to sell your house. To avoid further delays and potentially allowing the house to be foreclosed on, your best option may be to work with a local real estate house buyer like us, People First Real Estate Advisors. We can buy your house fast with an all-cash offer. If the house doesn’t have enough equity or time for a retail sale or to sell for cash, then another option is our exclusive Mortgage Relief Service. If you’re interested we can look at your situation and make you a fair offer on your house in as little as 24 hours. Simply call or fill out the form below.
- Foreclosure. Last resort is to let the house fall into foreclosure. This is typically the worst possible scenario. It will harm your credit, can prevent you from buying another house for years, and you could still be left with the bank chasing you for more money 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.
Have a pending foreclosure? We’d like to make you a fair all-cash offer on your house.