Short sale vs. foreclosure: what’s the difference?

What is a Foreclosure?

In simple words, a foreclosure home is one wherein the owner is not able to make his mortgage payments and the bank has repossessed his home. If for some reason, you are unable to make payments; your lender has the right to foreclose on the property so they can attempt to regain the money lent to you.

A home is foreclosed when you buy a house in Corpus Christi, TX on a mortgage and fail to repay it. The lender assumes the ownership and possession of your property and evicts the borrower. These properties are then sold via traditional means or it is sold at an auction. Foreclosure damages the credit rating of the borrower.  This makes it difficult for them to obtain a mortgage for many more years.

Depending on which state you live in, foreclosure can work in different ways. You can get all the information about it on the HUD Government website.

What do you mean by a short sale?

In a short sale, the owner of the home is still the borrower.

A short sale is the sale of a real estate in which it proceeds from selling the property if the borrower falls short on the balance of debts that are secured by liens against the property. The property owner is not able to afford to repay the liens’ full amounts.

In some cases, this option is agreed upon by the borrowers and the lenders. In the short sale, the home is sold for less than the outstanding balance of the loan. The unpaid balance, also known as deficiency may or may not be owned by the borrower.

This option usually takes some time because some lending institutions may own the mortgage. All the parties who have any stake in the property should agree to the sale terms. The potential deal could fall through even if any one of the lenders does not agree.

Short sale vs. Foreclosure - what should be your option?

While both these options have their complications, a short sale has very less impact on the borrower’s credit worthiness. Foreclosure can impact the borrower’s credit score by 300 or so points. A short sale may dent the credit score by 100 points.

Borrowers who have been foreclosed become ineligible to purchase another house for at least 5 to 7 years with a traditional mortgage. Whereas in some cases, a short sale borrower can purchase a home immediately if they want to.

With the current pandemic and the COVID 19 situation, most Americans are having a hard time paying their monthly mortgage money. That is why; the borrowers have the following three choices if they are facing troubles in paying their mortgage on time -

• Being foreclosed

• Initiating a short sale

• Sell houses for cash

Sometimes, the lenders are willing to work with the borrower in order to complete a short sale for avoiding the fees and the time-consuming process of conducting a foreclosure.

Our suggestion is 

Have a word with your lender to work out things. If your bank is not willing to work with you, the best option available to you is to sell your house for cash. 

You can attempt a short sale or another program that your lender may have that can forgive a part of your loan and create a new or more affordable monthly payment plan. This will help you get back on your feet too.

Foreclosure - The last resort is to let your house fall onto a foreclosure. This will be the worst possible scenario that will harm your credit. There might be a chance that you still will be left with some money owed to the bank even after the foreclosure will be finished.

The Final word 

By knowing what options are available to you, you may be able to dodge a significant impact on your credit score which will allow you to buy a new home when things normalize and your situation improves. A foreclosure creates a negative impact on your credit score report. And your possibility of buying a new home when the situation improves will be difficult for another 5 to 7 years. So, a short sale will be a better option if you have the opportunity.

So are you someone with a pending foreclosure and looking for options to sell my house fast in Corpus Christi to avoid foreclosure? Get in touch with reputed buyers The GrahamBelle Group, who will not only help you to list your houses for sale in Corpus Christi but they also buy a house for cash  and close in as little as 2 weeks.

Give them a call today and sell your house for cash with no commission or closing costs!