Is a Short Sale is better than a Foreclosure? Yes, here's
8 Reasons why
Is a short sale better than a foreclosure?
Is a short sale better than a foreclosure? Foreclosure is something no homeowner imagines themselves going through. So when you are faced with the possibility of losing your home to foreclosure it can be extremely worrying, scary and frightening. Unfortunately for many people, this is a reality they face an economic and real estate market dips have plunged many distressed homeowners into this new territory.
Though some homeowners have their options when facing foreclosure to help potentially stop or even avoid foreclosure. One of these options is called a short sale and that is a transaction in which the bank lets the homeowner sell the home for less than what’s owed. The reasoning is that once the delinquent homeowners connect with a real estate agent and market the home at a large discount, once it sells the lender will be able to recoup the majority of what the homeowner owes. This helps the lender also by saving on the costly foreclosure fees and process.
A short sale is a great option for homeowners looking to avoid or foreclosure. The most important question though is “is a short sale better than a foreclosure?” While it doesn’t completely remove the borrower from debt but it can leave the leftover debt much more manageable and in a better position than a full foreclosure. Read on to learn 8 ways why a short sale is more beneficial than a foreclosure
1) Saves Your Credit
Your lender will also want to handle a foreclosure in the cheapest and easiest way possible. Because if this it is better to recover a large part of the loan then to take a total loss. Therefore most banks and lenders will agree to a short sale rather than going through with the foreclosure. One concern a homeowner might have though is that a bank can sue for the rest of the amount owed on the loan after a short sale. This is called a deficiency judgment and will show on your credit report and affects it negatively just as a foreclosure would.
Though most banks and lenders won’t go this route to avoid another lengthy and costly process. They will cut their losses and move on especially in cases where a homeowner was unable to pay their mortgage due to a proven hardship. This will help the homeowner save the hit on their credit and greatly reduce the amount of money owed.
2) It Avoids Foreclosure
The main reason for considering a short sale is to avoid foreclosure. Foreclosure is a long heartbreaking process for many homeowners that includes many expenses. Legal and attorney fees must be paid on top of the already huge amount of debt. Foreclosure also negatively affects your credit and can make it in some cases extremely difficult to many and future major purchases such as a loan, a new car or even a new home. Besides the homeowner banks also lose lost of money on foreclosures. Low sale prices at auction and the cost of resources spent to take care of a foreclosure almost always guarantees the bank loses out also.
Foreclosures also hurt the housing market by dropping not only its home value but surrounding homes as well. Foreclosed homes are less likely to be taken care of and more likely to remain on the market for long periods of time.
3) It Can Save You Money
The average foreclosure legal costs are $7,500 according to the U.S. Congress Joint Economic Committee. This is not including any other fees or costs that accumulate through the lengthy foreclosure process. This can be a tricky situation a homeowner to find themselves in as the costs continue to rise with the already huge amount of debt to be paid, they will be quickly forced to take drastic measures such as filing for bankruptcy. Even with the immense negative impacts it brings, it may be the only option.
Most banks and or lenders won’t look to file a deficiency judgment if it seems possible to come to a solution. Each situation is independent and unique but if all sides agree to a short sale then the new buyer can help absorb a majority of the costs and leave the previous homeowners with a much more manageable balance to pay off. If the bank is wanting to recoup their $200,000 loan back but the homeowner is able to sell it in a short sale for $175,000 then the chance of going to court drastically reduces and the lender may even let you walk or work out a new plan to pay the remaining $25,000.
4) It Can Help Your Lender
Lenders don’t want homeowners to go through foreclosure. It’s a long distracting process for them always more often then not resulting in them losing hundreds if not thousands of dollars also. Things such as legal fees and attorney costs, sending letters and warnings to the homeowners, and preparing documents all to add to the cost. Even afterward when a lender can sue to recover some of their losses this also costs to prepare documents and get legal fees in order. Once the lender retains ownership of the home they will face problems all homeowners face when selling their home and will have to put money into refurbishing and fixing the home in preparation to sell along with contacting a real estate agent.
However, when doing a short sale the lender can regain a large portion of what is owed on the loan and can avoid the lengthy and costly legal fees. In many cases, a short sale is the best option for a lender also and can help save on foreclosure expenses. Speaking with your lender and finding out if a short sale is a viable option and asking is a short sale better than a foreclosure can help clear up any concerns and questions between you and your lender.
Go here to read more about why your lender may be willing to work with you.
5) Benefits the Housing Market
Due to the housing crisis, many homeowners saw the equity they built up over the years vanish in the blink of an eye. When property values drop due to multiple foreclosed homes, once bustling areas start to fill with empty bank owned homes. Finding buyers for these properties can be difficult also.
With short sales it allows new homeowners to get into homes at a more affordable rate and can help grow back once-dying neighborhoods. A short sale helps avoid the pitfalls of a foreclosure sale and can reduce the number of vacant bank-owned homes. It also can help to decrease home values as short sales can recoup a majority of a homes value saving it from the foreclosure auction.
6) Gives Homeowners More Control
Once the foreclosure process begins the homeowner must be prepared for a series of challenges. These challenges, of course, bring tons of stress as you begin to receive demand letters and legal documents as the lender begins to file fire foreclosure against you. With this in mind, you must still determine is a short sale better than a foreclosure?
There is still paperwork and meetings that accompany a short sale but it’s more like a regular sale then a stressful foreclosure process. This will allow a homeowner to play a more active role in the process and deal with the bank, homebuyer and real estate agent. It allows you to be less at the mercy of the bank's attorneys which is a headache most homeowners would like to avoid.
7) Can Help the Homeowner Avoid Scams
Foreclosure in itself is a tough long process. To add insult to injury though many dishonest crooks wait around every corner looking to prey on stressed, overwhelmed homeowners looking for an answer.
Many scams have arisen over the past few years dealing with foreclosure and you can read more about that here. Promises to save homes, and offer a money back guarantees have left many victim homeowners even more in debt and lost.
A short sale takes away the opportunity for many scam artists and allows the homeowners to work with trusted professionals.
8) Offers Peace of Mind
Real estate transactions by nature are stressful. Between the never-ending exchange of messages, negotiations, and paperwork it can be a whirlwind. But the pressure and negative implications faced by foreclosure exceed the worst experience you can have with a short sale.
While short sales aren’t the end all be all and can still have some risks associated with it, it is miles ahead of the negative impacts of foreclosure. To answer the question is a short sale better than a foreclosure, you have to look at all the negative effects of foreclosure versus a short sale. In a foreclosure, you face large credit hits, a looming negative history, and a load of debt is all real possibilities when facing foreclosure. A short sale will help avoid all these possibilities and save yourself from any legal proceedings.
This, in turn, will have a positive impact on homeowners and help them stay level-headed through their situation.
Contact a Foreclosure Real Estate Professional Today!
Is a short sale better than a foreclosure? The answer is yes! To get help with putting your foreclosure up for sale contact us here. Or give us a call at (321) 430-1412 to get in touch with a foreclosure real estate expert today.
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