Wilmington Real Estate’s Top 10 List: Reasons a Short Sale is better than a Foreclosure
We will focus this Top Ten List on explaining the differences between a short sale and a foreclosure. Buying and selling your home can be a complicated process, with a plethora of ways to buy your home, and a seemingly endless variety of ways to sell it, as well.
A short sale gets its name because it is “shorting” the bank on the amount that is owed on the mortgage. The bank usually allows this because the owner owes more on the mortgage than the house is actually worth, and the owner is behind on the payments. Often times the seller will automatically think they need to foreclose, but that is not necessarily the case. Why foreclose on your home when you can short sale?
10. Under normal circumstances, when you foreclose, you will not be able to buy another home for 5-7 years, per Fannie May guidelines. With a short sale, that time is cut down to 2 years (on average).
9. Short sales can be time consuming, but are usually nothing compared to a foreclosure, which can take years to complete.
8. Foreclosures are usually embarrassing to the homeowner. There is a “Notice of Public Sale” on front door. With a short sale, no notice is given, which saves you from that embarrassment.
7. A foreclosure stays notated on your credit report for 10 years, whereas a Short Sale is not specifically noted. Because you will probably be behind in your payments, your credit will be affected, but it is much easier to bounce back from.
6. Nowadays, it is very well known that the economy is bad and home prices are not what they used to be. The homeowner generally feels less personal shame whenever they are allowed a short sale over a foreclosure.
5. When you short sale your home, you are actually able to meet the new owners, as your ownership is not immediately snatched away from you. When your home is foreclosed, the bank ceases possession immediately, and your rights are stripped away.
4. Foreclosures decrease the property value of the homes within a one mile radius by an average of 1 percent, and it also negatively impacts the housing market http://bit.ly/16LavaT. When you choose to short sale over foreclosing, your neighbors will thank you! Who knows, maybe you will even be able to finagle a homemade pie out of the whole deal!
3. Foreclosures are generally rather expensive, as they require lawyers, who then require payments. Often times people file bankruptcy after their foreclosure due to all the unknown and unforeseen expenses. Short sales are not as complicated, and do not usually require any interaction with the law.
2. There is a good chance that with the sale of the home, the lender will be able to earn back some of the money it is owed on the sale of the property, which makes it much less likely that they will take you to court in pursuit of a deficiency judgment. This is because the cost of suing you will just not be justified. A foreclosure is a lot more expensive for the lender, however, which may increase the likelihood of you being sued.
1. There has been a much higher chance of fraud with foreclosure. Short sale homes are generally not as much of a target by scammers, because they are less likely to be announced in public record, and usually the sellers are not as desperate to save their home (thus they are less likely to fall victim to the con artists). That being said, it is good to arm yourself against any possible fraud. Please take a second to review this article on how to avoid home fraud: http://www.doj.state.or.us/consumer/pages/foreclosure_fraud.aspx
As mentioned above, buying and selling your home can be a tough road to navigate. Please do not feel like you have to go it alone; feel free to email us (firstname.lastname@example.org), or give us a call at (910) 622-0319.