The Differences between Short Sales and Foreclosures
As many home owners are encountering foreclosure of their homes in this economy, short sales are becoming a good alternative. Short sales involve an contract between the mortgagee and the owner to sell the property for less than the mortgage of the home and often to waive the remaining balance on the loan.
Short sales can be a good alternative to foreclosure since they generally are not as damaging to your credit. Unlike loan modifications, short sales do not need homeowners to qualify. Banks will often endorse a short sale if the homeowner owes more on their mortgage than the house is worth and are having issues making the payments. Often banks will allow a short sale if the borrowersw have certain personal factors that prevent them from paying. Missing six mortgage payments, for example, does not necessarily warrant a short sale, however.
Homeowners will need to come prepared to the lender with a financial demonstration. It may be decided that the price will be below market value in order to garner more offers.
Short sales can aid the borrower of a burdensome financial burden and allow them to eliminate their mortgage debt. Foreclosures and short sales differ in many ways but are similar in that they can be confusing and difficult to understand. They therefore require careful deliberation when deciding what is best for your property and your financial situation.
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