Short Sale vs Foreclosure A Quick Comparison
In the short sale vs foreclosure comparison, it is important to look at how these two processes work. If you own a home, and stop making payments on it, the lender will begin the foreclosure process, in as little as six to eight weeks after your missed payment. If this occurs, you may need to fight the foreclosure using what is called a short sale. If your only options are a short sale or foreclosure, a short sale is often the better route to take since it offers some protection to your credit. But, what is this?
Short Sale Defined: A short sale is a situation in which you sell your home for less than what is owed on your current home loan. For example, if your home is in foreclosure and you owe your lender a total of $150,000 on the property on a mortgage, the lender could foreclose on the property and then have to deal with trying to sell the property. Your personal credit would be destroyed in this process since you walked away from the loan. To avoid this, you find a buyer who is willing to purchase the home from you. The problem is, the buyer does not want to pay full price. He agrees to pay $125,000 instead.
In a short sale agreement, the bank agrees to accept the lower payment as payment in full for the loan. You are forgiven for the loan in total and your buyer purchases the property for the concluded on cost. In this example of a short sale vs foreclosure, the simple benefit is that your credit isn’t wiped out in the short sale. However, you may still lose your house.
You could be able to get the bank to agree to a short refinance, where the bank will refinance the loan at the lower price and keep you on as the borrower. In a short refinance, a portion of the cost of the home is forgiven, which helps to lower the money payments, making it less complicated for you to make payments.
If you’re a good borrower, and something has occurred that has caused you to enter into the battle of short sale vs foreclosure, the best move to make is to work with your bank to discover a solution. A short sale could be a great answer, as would a short refinance. In either situation, you don’t have to have the negative impact of a foreclosure on your credit report. Make the effort to discover what all your options are before you agree to a short sale or any sort of foreclosure.
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