Whether you’re a buyer or a borrower/seller, a short sale and foreclosure each present different advantages and difficulties.
What Is A Foreclosure In Baltimore MD?
In simple terms, “a foreclosed home is one in which the owner is unable to make his mortgage loan payments and the bank repossessed the home” (source). If you stop making your house payments, your lender has the right to foreclose on your property so they can attempt to recoup their money that was lent to you.
A home is typically foreclosed on when a borrower fails to make mortgage payments. The lending institution assumes ownership and possession of the property and typically evicts the borrower. These properties are then sold at auction or more traditional means utilizing the service of real estate agents. A foreclosure can damage the credit rating of a borrower and make it very difficult to obtain a mortgage for many years.
A foreclosure can look different from state to state. Check out the foreclosure process information over here at the HUD Government website.
What Is A Short Sale?
In a short sale, the home is still owned by the borrower.
“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)
In some cases, a short sale is an option agreed upon by borrowers and lenders. In a short sale, the home is sold for less than the outstanding balance of the mortgage. The unpaid balance is known as the deficiency amd may or may not still be owed by the borrower.
This option typically takes some time, as a few different lending institutions may own the mortgage. All parties who have a stake in the property must agree to the terms of the sale and a potential deal could fall through if even one lender doesn’t agree.
Short Sale vs. Foreclosure – Your Options
While both options can have ramifications, a short sale often has less of an impact on the borrowers creditworthiness. A foreclosure could impact a borrower’s credit score by 300 or more points, where a short sale may only dent the credit score by 100 points.
Borrowers who are foreclosed on are often ineligible to purchase another home for 5-7 years with a traditional mortgage, where under certain circumstances, a short sale borrower can purchase immediately.
As many Americans struggle with an economy that has yet to completely recover from the 2008 crash, people are having a hard time making monthly mortgage payments. Choosing between being foreclosed and initiating a short sale (or a 3rd option, selling your Baltimore 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 to avoid the fees and time consuming process of conducting a foreclosure.
Our suggestions are:
- Talk with your lender and discuss ways that they can work with you on your loan. We can help guide you in the right direction if you run into issues with your lender. Simply reach out to us on our Contact page and we’ll discuss your situation.
- Attempt a short sale or other program your lender may have that forgives part of your loan, creates a new and more affordable monthly payment so you can get back on your feet, etc.
- If the bank isn’t willing to work with you then your best option may be to sell your house. Work with a local real estate house buyer service like Baltimore Wholesale Property to sell your house fast for an all-cash offer. If you’re interested we can look at your situation and make you a fair offer on your house within 24 hours. Just fill out the form on our website over here >>
- Foreclosure. Last resort is to let the house fall into foreclosure. This is the worst possible scenario. It’ll harm your credit and you could still be left with money owed to the bank even after you go through the foreclosure process.
By knowing your options, you may be able to dodge a significant impact to your credit score, allowing you to purchase a new home when your situation improves.
Have a pending foreclosure? We’d like to make you a fair all-cash offer on your house.