As a buyer or as a borrower/seller, you should understand that short sales and foreclosures each have their own set of perks and disadvantages.
What Is a Foreclosure in the City of Atlanta, GA?
In layman’s terms… “A foreclosed home is a residence in which the owner has been unable to make his mortgage loan payments and the bank has seized possession of the property”. You have the right to have your home foreclosed upon if you fail to make the payments on your mortgage. This allows your lender to seek to collect the money that they have loaned you.
Foreclosure occurs when a borrower fails to make his or her mortgage payments on time. The lending institution takes over ownership and possession of the property, thereby evicting the borrower from the premises. Afterwards, these properties are sold at auction or through more traditional channels, such as the assistance of real estate agents. A foreclosure can have a negative impact on a borrower’s credit rating, making it exceedingly difficult for them to secure a mortgage for many years after the event.
Depending on the state in which you reside, a foreclosure might take place in a variety of different ways. On the HUD Government website, you may find out more about the foreclosure process and how to avoid it.
What Is a Short Sale and How Does It Work?
In a short sale, the home remains in the possession of the borrower.
“A short sale is a real estate transaction in which the proceeds from the sale of 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 in which the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt.”
A short sale is an option that has been agreed upon by both the borrower and the lender in some instances. During a short sale, the home is sold for less than the amount owed on the outstanding mortgage loan balance. The unpaid balance (also known as the shortfall) may or may not be payable by the borrower at the time of default.
Due to the fact that the mortgage may be held by a number of different lending institutions, this alternative can take some time. All parties who have an interest in the property must agree on the terms of the sale, and a possible transaction could be derailed if even one lender does not agree on the terms of the transaction.
Alternatives to Foreclosure: Short Sales and Foreclosure
While both methods can have negative consequences, a short sale is more likely to have a less negative influence on the borrower’s creditworthiness in the long run. A foreclosure could have a negative impact on a borrower’s credit score of 300 points or more, whereas a short sale may only have a negative impact of 100 points.
In most cases, borrowers who have been foreclosed on are ineligible to acquire another property for 5-7 years. In contrast, in some situations, borrowers who have completed a short sale may be permitted to purchase a home immediately.
The economy is still struggling for many Americans, who are having difficulty keeping up with their monthly mortgage payments as a result of the 2008 financial crisis. For a borrower who is having difficulty making their mortgage payments on time, the decision between getting foreclosed and commencing a short sale (or a third alternative… selling your Atlanta house fast) is an easy one.
Occasionally, lenders will cooperate with borrowers in order for them to complete a short sale in order to avoid the expenses and time-consuming process associated with a foreclosure.
Our recommendation is always the same.
Consult with your lender and explore ways in which they might be able to collaborate on your loan. We provide this service so that we can assist you in navigating the lending process if you encounter difficulties with your lender… Simply contact us through our Contact page and we’ll be happy to discuss your case.
Short sales and other programs that your lender may offer, such as loan forgiveness or the creation of a new / more affordable monthly payment, can help you get back on your feet and help you get out of debt.
It’s possible that selling your home will be your best alternative if the bank is unwilling to work with you very much. Utilize the services of a local real estate home buyer agency such as Georgia Fair Offer to sell your house quickly for an all-cash offer. Please let us know if you are interested, and we will check into your situation and make you a fair offer on your home within 24 hours. Simply complete the form on our website, which may be found here >>.
Foreclosure. The last resort is to allow the property to go into foreclosure. This is the worst-case scenario that could occur. It will have a negative impact on your credit, and you may still owe money to the bank long after the foreclosure has been completed.
Because you are aware of your alternatives, you may be able to avoid having a substantial negative influence on your credit score, which will allow you to acquire a new home when your financial condition improves. Short sales may be the preferable alternative if you have the potential to do so. A foreclosure on your credit report makes that prospect exceedingly impossible for 5-7 years.
Do you have a foreclosure on your hands? For your consideration, we’d like to make you a reasonable all-cash offer on your home.