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Foreclosure Process versus Short Sale
If you’re a homeowner struggling to pay for your house mortgage, you should look into foreclosures and short term sales to help you manage your finances. Of course, considering either of these options means that you will have to part ways with your home. However, the terms of this parting will differ with each.
Everybody dreams of owning their own home someday – a place to call their own. However, one needs to have saved up significantly and possess impeccable discipline while handling money to be able to have this dream come true. Having a good credit score is a bonus. That said, you need to be capable of keep paying for this home so that you can retain ownership. In the unfortunate circumstance that you lose your job, your family income takes an unforeseen hit, or the interest rates on your property get hiked by a significant margin, you could end up with debt if you continue to hold on to your house adamantly. You could opt for either a short sale or a foreclosure procedure to relieve you from your mortgage payment.
Before you choose from these two options, however, it is wise to inform yourself about all there is to know about these procedures. How do they match up with each other? What are their individual advantages and disadvantages? We attempt to shed light on this and more, below. You can study the information supplied and make an informed choice for yourself accordingly.
What is the Foreclosure Process?
Foreclosure procedures are initiated by the lender. If you, as a mortgagor, fall behind on your mortgage payment by three-six months, your lender may choose to subject you to a foreclosure process. You might still be able to bypass this procedure if you update your loans on time. Foreclosure procedures are not uniform across state lines, and the rules vary from state to state. These rules pertain to the kind of notification that the lender ought to provide the mortgagor with and the options available to the homeowner for bringing their loan up to date. These laws usually also dictate how long a bank has control over the selling of the property.
During a foreclosure procedure, the lender takes over the property legally and forces the sale of the same. Generally, foreclosures take place when the homeowner has already abandoned their home. On the off chance that they still haven't done so, they are forcefully evicted by the mortgage lender.
The lender then proceeds to have the property appraised and makes preparations for its sale. A foreclosure procedure is completed quicker than a short sale because the lender is in a hurry to liquidate the asset. Foreclosed properties might be auctioned away at sheriff’s sales, where buyers publicly bid on such properties.
Sheriff's sales are organized at county levels at frequent intervals. These sales might be organized locally in your county every other week or at least a month. If you wish, you can enquire with your local county sheriff's department on the exact frequency of sheriff's sales. Sheriff's sales contain different kinds of foreclosed-upon property ranging from single storey houses to large commercial buildings. These sales take place in the sheriff's office generally, but they may also be held in your county courthouse. Lenders are allowed to participate in these sales and attempt to buy back these properties again. Keep a lookout for newspaper ads of upcoming sheriff sales to learn about the properties on sale. You could also visit the official county sheriff's website and keep updated on the same.
What is a Short Sale?
A short sale can occur when the lender and the homeowner mutually agree upon initiating such a process. The lender also requires documented evidence explaining why a short sale procedure might be beneficial in the given circumstances. The lender or lending institution needs to ascertain that it will not incur losses in the process as there are high chances of this happening in a short sale.
During a short sale, interested buyers negotiate the price of the property with the property owner and then seek approval from the lender/lending institution. If the lender/lending institution assents, the official change of hand ensues. On the completion of the transaction, the lender receives the full amount paid by the buyer. If there is any deficiency on the initial loan amount, this is taken care of by the mortgagor.
Difference between a Foreclosure Procedure and a Short Sale
Below we compare the primary differences between a foreclosure and a short sale –
· A foreclosure process can be initiated by the lender only. A short sale, on the other hand, might be initiated by the mortgagor/homeowner.
· A foreclosure can have an extremely damaging impact on your overall credit report. It can stay on your credit report for as many as 7 years. A short sale, however, will not hamper your credit rating anyhow. With a short sale on your credit report, you could still purchase another home almost immediately if you so wished. For a foreclosure though, you’d have to wait a minimum of 5 years to initiate such a transaction.
· Foreclosure procedures are completed much quicker than short sales. It is because the lender/lending institution strives to liquidate this asset as soon as possible, to recover maximum gains. A short sale is paperwork-intensive and can be quite a lengthy procedure, lasting upwards of a year in some cases.
As a Buyer, Which is more appropriate for you?
Bargain house hunters can really benefit from a short sale, but they have to possess adequate patience to see such a transaction. In fact, if you are a first-time property buyer, try not to get swayed by a short sale deal. You are bound to get frustrated by the long wait time and lengthy paperwork involved soon enough.
Not only does a typical short sale take about 3-4 months to be finalized, the mortgage lender might ask you to pay for a ton of additional costs that the previous owner would typically be responsible for. A short sale will usually involve a bank, and it is the bank that will attempt to negotiate these payments with you, the prospective buyer. If you so wish, you can ask for a mortgage on this property. You can also request for inspection before deciding to spend on this property.
A foreclosed property does not provide you with such facilities. You cannot use a loan to pay for it and must pay cash if you are interested. You are also not generally provided any warranty on your foreclosed property purchase. So basically, you are not made aware of any repaairs that the property might need and will have to accept it as is. Consequently, you may end up paying handsomely for these repairs later.
How Will You Know When to Initiate a Short Sale for the Property You Own?
A Lis Pendens is a definitive indicator that you must take actions to remedy the financial mess you’ve found yourself in. A “Lis Pendens” is an official notice which is addressed to the owner of a property, alerting them that their claim of ownership is in danger. Lenders file these notices to warn their debtors that they ought to take urgent remedial action and try to take care of any pending payments on the property in question. It can be presumed as a notice before the lender initiates foreclosure on the property. The current owner can either try to initiate a short sale as a response or agree to the impending foreclosure.
A notice of default sent to the property owner by the lender is a similar warning. It informs the owner that they are behind on their mortgage payments. If the notice of default stipulates a grace period, the property owner can use this grace period to negotiate a short sale. If the notice of default does not specify any such pardon, the owner ought to ready themselves for foreclosure on their property.
Find Foreclosed and Short Sale Property Deals at Jaw-Dropping Prices in Jersey Shore
Jersey Shore Realtor Pizzi Properties powered by eXp provides dependable realtor services in Jersey Shore. Come to us for any further guidance that you might require on short sales and foreclosures. You can also pick from the range of foreclosed houses and properties on a short sale in the Jersey Shore area made available by our Jersey Shore Realtor Local Realtor & Real Estate Marketing expert Pizzi Properties. Real Estate sells itself; I sell Service. When you buy your property from us, You are going to Like where you Live I Guarantee it.