SHORT SALE OR FORECLOSURE - WHAT’S BEST FOR YOU?
With so many Americans facing the real threat of foreclosure, many homeowners are searching for options to mitigate that threat. One very popular option is selling their home through the short sale process. Over the past few years this process has become the most popular form of selling a home that is “under water.” The term under water means that the mortgage balance on the home is higher that the home is currently worth,
A short sale or pre-foreclosure sale precedes the home being officially repossessed or foreclosed on by the lender. The home is usually placed on the market prior to the home having a notice of trustee sale placed on the property. Whether you should do a short sale or let the home go into foreclosure will depend on several factors. In many cases this decision is made for you. If the bank thinks you can continue to pay the mortgage then they will not agree to a short sale process and your only outlet would then be to let the property go into foreclosure.
If the bank will agree to a short sale there are a number of benefits for the seller, the process will usually take less time than the foreclosure process, you may sleep better at night knowing that who is buying your home, you will spare yourself the social stigma of having a foreclosure against your record, your home sale will be handled like any other sale but most importantly, you may be able to qualify for a new mortgage a year or two sooner that if you went through the foreclosure process. There are some negative ramifications with short sales, your credit score will be affected but usually not as much as a foreclosure and it will bounce back quicker. Short sales sellers are seen as less risky than foreclosed sellers. For example Fannie May recently adjusted their guidelines to dictate only a two year waiting period for a short sale seller to purchase another primary residence, while the waiting period for a foreclosed seller can be as much as 5 years.
A short sale can be a win for both parties. The seller avoids a foreclosure on his property and will have the opportunity to re-enter the market years earlier than if going through a foreclosure. The lender usually receives more for the property sooner, avoids incurring additional legal, carrying and marketing costs associated with a foreclosure. Additionally short sales are great options for buyers looking for bargains and have the time and skills to negotiate effectively with the lenders.
In most cases, short sales can present a better option for distressed sellers than foreclosures. It is neither a short or easy process and can become very frustrating to a buyer. Sellers should seek thorough legal and tax advice when considering this route.
With short sales at times amounting up to 40% of the current properties on the market, they can represent real opportunities for buyers seeking new homes. If these homes are priced at market they can sell in just a few days. Lenders want to see a pre-qualification letter or bank statement if paying cash prior to submitting an offer. One of the biggest complaints with buyers looking at short sale properties is that by the time they get their pre-qualification letter, the property has numerous offers.
If you are interested in purchasing a short sale property, you need to be able to act quickly, you will need to get pre-qualifies prior to going out looking at property. We can help you with the pre-qualification process and will be happy to recommend a number of lenders to you. Once you have been pre-qualified we can set up a MLS search to meet your specific needs in a home. You will be notified by email every time a new home comes on the market that meets the criteria we have set up for you. Once you have chosen the right home we will be able to act quickly on acquiring the property.
