Short Sale vs. Foreclosure. What’s the better option? What do those even mean? A short sale and foreclosure each present different advantages and difficulties. Make sure you know the difference if you are facing foreclosure
What Is A Foreclosure In Oklahoma?
In simple terms… If you quit making your mortgage payments… the bank has the right to foreclose on your property so they can attempt to recover some or all of their money that was lent to you.
A home is typically foreclosed on when a borrower fails to make the mortgage payments on time. You usually have to be 1-6 months behind before the bank starts thinking about foreclosure. Through the courts and foreclosure, the bank assumes ownership and possession of the property, evicting whoever is living there. These homes are then sold at auction to the highest bidder or by more traditional options using a real estate agent. 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 bank hasn’t yet taken the house back. It is still owned by the owner or 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)
If you are facing foreclosure and get the bank to agree to do a short sale, you can sell the house for less than what you owe with approval by the bank. The unpaid balance (known as the deficiency) may or may not still be owed by the borrower. In most cases, the bank just wipes the slate clean though so everyone can move on.
This option typically takes some time, as long as 8-12 months but usually closer to 4-6 months. If you need help doing this, we have been through it before and can help. Just call/text us at 405-673-4901 with questions.
Short Sale vs. Foreclosure – Your Options
While both options can have negative impacts on your credit, a short sale has a much less negative effect on you. A foreclosure could impact a borrower’s credit score by 300 points or more, whereas a short sale may only dent the credit score by 100 points.
If you get foreclosed on, you are often ineligible to purchase another home for 5-7 years with a traditional mortgage. Under certain circumstances, a short sale borrower can purchase immediately after everything is settled.
As many Americans struggle with an economy that has yet to completely recover from the 2008 crash, folks are having a hard time making monthly mortgage payments. Choosing between being foreclosed on and doing a short sale (or a 3rd option… selling your Oklahoma City 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. It helps the bank to avoid the court costs and attorney fees and time consuming process of doing a foreclosure.
Our suggestion is as follows:
- Speak with your bank and discuss ways that they can work with you on your loan. Maybe they are willing to refinance the loan and your late payments. Sometimes they won’t though. Some banks have special programs to avoid the bank and you having to go through foreclosure. You just have to call and ask them!
- Try a short sale. You sell your house this way, but avoid a huge hit to your credit score and get out from under the loan.
- If the bank isn’t willing to work with you very much… your best option may be to sell your house as is. We can help you do this. If you’re interested we can look at your situation and make you a fair offer on your house within 24 hours.
- Let the bank take it back. Last resort is to let the house fall into foreclosure and wait for the bank to take the house. This is the worst solution. Your credit will be damaged and if the bank can’t get enough money when they sell your house, you might still be on the hook for it.
By knowing your options, you may be able to avoid a huge impact to your credit score, allowing you to purchase a new home when your situation improves. So what do you think? In the battle of Short Sale vs. Foreclosure, what option is better?
Are you facing foreclosure? We’d like to make you an as-is all-cash offer on your house. We buy houses in foreclosure or via short sale all the time. We know the banks. We know the process. We can help.