Foreclosures
If you are perplexed about the difference between short sales and foreclosure, then you are not alone; there are numerous puzzled people besides you as well! Along with several similarities between short sales and foreclosures, there are noteworthy and considerable differences between these two as well. Let us converse the diversities of short sales and foreclosure.
Foreclosure is the legal process in which the possession of a mortgaged property is taken back by the mortgage lender from the mortgage borrower when the mortgage borrower to unable to keep up the mortgage payments. Through this process the mortgage borrower’s equitable right of redemption is terminated by law. Foreclosure is undoubtedly a very distressing and destructive position for a borrower. The mortgage company would be disturbing you all the time and demanding the due payments. There can be many reasons why someone could be in a position of foreclosure, perhaps joblessness or death of a family member or a divorce. But whatever the cause you would be disturbed during your family time and possibly even during your sleep time!
Homeowners who are about to face a foreclosure have a few options if they want to stop the foreclosure. Why would they need to stop the foreclosure? Well, the credit rating of this individual would be significantly damaged if the foreclosure is not stopped. According to experts, the credit score of an individual plunges from 200 to 300 points. The homeowner would not be able to purchase another home for five years. The foreclosure would remain in the credit history of the individual for ten years. This also means that this issue might also affect current or future employment. Moreover, the banks might also pursue a deficiency judgment with the intention of collecting the loan balance and for most individuals this leads towards bankruptcy. Foreclosure is definitely not in the favorable interests of anyone.
As mentioned above, there are a few options for homeowners who wish to stop the foreclosure. Short sale is an alternative or substitute to foreclosure although a short sale also results in a negative credit report. This sale of the real estate gives the homeowner the opportunity to sell the real estate for less than the amount which is owed. The best benefit of a short sale is that it prevents bankruptcy. However, in order to pursue this sale first it is vital that the lender gives the approval to receive an amount which is lesser than the actual amount due and agrees to release the lien on the real estate. This is the phase which can be very frustrating and intricate for the mortgage borrower. The mortgage borrower needs to contact the lender’s loss mitigation department and receive the approval of short sale. This might involve talking on the phone, visiting the office in person and writing letters as well.
Although a short sale affects the credit rating of the mortgage borrower negatively too, but the damage to the credit rating through short sale is much lesser than the damage caused through foreclosure. According to experts, a short sale might sink the credit score of the homeowner with 80 to 100 points, whereas foreclosure, as mentioned above, can plunge the credit score of the individual with 200 to 300 points. This is the major difference between a short sale and foreclosure.
Another difference between short sale and foreclosure is that usually it would take up to 3 years for a lender to offer feasible interest rates to the individual who has gone through foreclosure. But if the individual has gone through a short sale, it would take perhaps only 18 months for a lender to offer rational interest rates to the individual.
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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: May 19, 2012
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