Short Sale vs. Foreclosure

Which is the Better Option?

Americans in today’s economy are finding that their financial security has been dwindling over the past decade, especially in the housing market. At one time, a house was one of the finest investments that you could stake your earnings in, with hopes you could pass it on to your children once it was paid in full. Unfortunately, many families are finding purchasing a home is much more difficult these days, and even worse, those who have invested in this asset for years are in danger of losing their property because they are not able to continue their principal or interest payments in the midst of an ongoing recession. If you are one of these individuals, you may be wondering, which is the better option- going through the process of foreclosure or choosing a short sale? Though both of these choices come second to owning your home, in tough times, tough decisions have to be made.

Foreclosure is when a property or home is seized by the lender, usually the bank, when a homeowner is not able to make payments on their mortgage or loan. The bank has rights to reclaim the property and auction it on the market, which can force the homeowner into eviction if they are not able to come up with the funding to pay the defaults. This is a sad and sometimes embarrassing step for property owner, but the bank needs to protect their investment of lending the money as well. There is a process that needs to be followed, which starts with a Notice of Default.

When a property owner is unable to make a payment, the bank is responsible to file a Notice of Default with the County Clerk’s office, and sending a formal notice to person in default. The homeowner is responsible for bringing the account current, which is sometimes very difficult, and if this is not accomplished, the lender will provide a Notice of Sale. This is to warn the homeowner that the property will be put up for auction, and that the foreclosure will be published to the public in the newspaper for at least the next three weeks. If the homeowner is still unable to correct the account, the house will be auctioned and they may be evicted if the property is purchased. Foreclosures remain on your credit report for the next seven years and severely lower your credit score, making it even more difficult to purchase a home in the future.

An alternative for foreclosures is going through a short sale process, which can save both the homeowner and the lender costs. This has been a popular option with the economic recession over the past five years, and many homeowners who aren’t even in default are now applying for this option. A short sale begins with an economic need expressed by the homeowner, who will apply to their creditor for a short sale in effort to sell their home for less than the total principal balance due. This process involves submitting paperwork proving economic hardship. Though a lender may accept this agreement, you will still be selling your home back on the market, losing one of your most valuable assets, and it will still impact your credit rating.

There is no guarantee that a lender will accept this application, because they will lose out on potential monies they would possibly get from the foreclosure process. However, with the economic crisis that has been looming, many lenders are realizing that making housing payments has become more than a struggle for many Americans, and therefore, this option has become more available throughout the United States. Thought this is still an incredibly difficult choice, it seems to be the lesser of two evils in the event that you default or you’re in danger of defaulting on your loans for your property.

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Approx. 6,500 sq. ft. of living space on approx. 1/3-acre corner lot. Big home with very cozy ambiance. State-of-the-art gourmet kitchen, sunroom/windowed porch, wrap aro...

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The listing content relating to real estate for sale on this web site is courtesy of MRIS. Listing information comes from various brokers who participate in the MRIS IDX. Properties listed with brokerage firms other than Real Estate Company. are marked with the MRIS Logo and detailed information about them includes the name of the listing brokers. The properties displayed may not be all the properties available. All information provided is deemed reliable but is not guaranteed and should be independently verified. All listing information copyright MRIS 2012. Last updated: February 22, 2012

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Short Sale vs. Foreclosure

Which is the Better Option?