Is a Short Sale better Than A REO or A Foreclosure
This is a common questions for homeowners in trouble with their mortgage company. Well lets take a look at each of them to make a determination. A short sale is when a homeowner sells a property for less than what is owed to the bank for the property with the banks permission. A foreclosure sale is when a property that was taken back by the bank ends up going to auction to try to recover for any losses. A REO is a real estate owned property or bank owned property that was to auction off, but it was not sold to a 3rd party at the foreclosure sale.
With an idea of each of those in mind now try to figure out which option can be more harmful to a homeowner whom is trying to save his/her credit, and suffer the least damage going forward. In all actuality, a short sale is the most beneficial of all the options mentioned. The reason why this is so is because the short sale looks much better on your credit report as a settlement, as opposed to a REO sale or a Foreclosure sale. With the REO sale it will have tax implications, you might want to talk to a tax attorney about that. A foreclosure can stay on one’s credit for up to 10 yrs. Trying to get any kind of loan with a foreclosure can be devastating, you would be considered among the highest of risk to a lender. On the other hand when you do a short sale which is settling what is owed on the account, that is much more attractive for future lenders that you might deal with after the short sale. It looks like you tried and succeeded at taking care of most of your obligation with your lender.
Making smart decision in tough economic times can be very beneficial to you and your family in the long run. Which can help you to recover from a bad situation much quicker in terms of your credit. Another attractive option is a Deed-in-lieu of foreclosure, which is where a homeowner gives back a property to the bank and walks away owing nothing. This is a more ambitious request from a bank. Some banks will do it if your have equity, especially when they can recover all or most of their losses; but they usually require you to make an attempt at selling the property in a short sale 1st, and if that does not work out then they will usually attempt to look at that option if it makes sense.
Always try to talk to your lender to see if they have any new and different programs available, because banks are always looking at new and different ways to try to recover their losses at the end of the day. Check on settlement where you can live in the property if you settle what you owe with them for in a large enough lump some settlement. This is primarily for someone who has had their mortgage for a long time and are close to paying it off, but instead of paying it off in payments they settle and owe no more. Always try to think creatively and bring up any unique option to your mortgage company, you never know sometimes. I have seen a lot of things work out in tough times that would not happen when the economy is thriving.
Doing a Short Sale
A short sale is an available way for a borrower to get rid of a home in order to face less financial impact on his or her credit report in the near future. Completing a short sale might not be the first choice for homeowners in a financial struggle trying to keep up with their financial obligations. However, sometimes there are no other choices but to sell a home as a short sale and avoid the stigma of foreclosure by doing so.
Most definitely getting your mortgage company to give you a loan modification would be a great choice for many homeowners who are behind on their mortgage payments. That is not always the case though. Sometimes lenders do foreclose on a borrower’s property when they are unable to work something out with the homeowner in a timely manner ahead of a foreclosure sale. A homeowner has to be active and see what other options their mortgage company might be willing to offer them, because if they are unable to work something out then their home could be sold at the next foreclosure auction. In my professional opinion, a short sale is far less damaging than a foreclosure on anyone’s credit history. Sitting around and doing nothing is the worst thing someone facing foreclosure can do. Always be proactive and talk to your mortgage company and see what they might be able to offer you. If you have tried several times to get a lower mortgage payment with no success, and you are unable to maintain your mortgage payments then why not consider selling your home as a short sale. I understand it is hard to part ways with your home that has stood as tangible evidence of your past life with all the memories and more; but if you are unable to make your house payments and you do not want the property to be sold from under you, then you must find a way to work out another solution. A borrower’s home will be sold at a foreclosure auction if nothing is done to work something out with his/her lender ahead of time. It is not a good thing for any homeowner who might already be under heavy financial stress in the first place to be told their home was just sold in an auction.
Available short sales being offered often has a quick move out option that will offer the homeowner up to $3000 to vacate the property faster than normal once sold; It is a special program that lenders have, and it benefits both the lender and the borrower. The longer the property stays there without making any income, the more costly it becomes for the mortgage company. It is better for a mortgage company to rid the property of any non-paying borrowers so that they can turn around and close on the sale to the new buyer. Therefore, it is more beneficial for them to offer money to get a borrower out of the property when it is time to do so. You really can not blame them, they are in business to survive.
