What You Need to Know: Foreclosures and Short Sales

Purchasing a home is by far one of the most important decisions you will ever make. After weighing all the benefits, you may determine that home ownership is the best option for you. Of course, there are variant developments in the process that eager home buyers must overcome prior to selecting the right property confidently. More so, the borrower has to be sure that they are willing and able to commit to keeping their promise as it relates to the transaction costs of buying a house. In many instances and under the most duress circumstances, many homeowners find themselves in a foreclosure or short sale situation. Both of these proceedings not only induce a great deal of anxiety, but they also service to ruin good credit.

First, it is imperative that you are aware of the differences between a foreclosure and short sale. A wildly misperception of foreclosure is that home owners “threaten” to give their home back to the bank. The only possible way to give your home to the bank is by allowing them to foreclose without you having to pay past debt. You are not actually giving the home BACK. Some homeowners also have the misconception that a short sale is not a real transaction. Don’t be mistaken, you need to be committed to your promise made to the agent, the bank, and the title company; you need to sale the property and be ready to move on the predetermine date.

In a foreclosure, the lender is required to auction off your property to the higher bidder. The lender will also advertise the home for sale and for a predetermined amount of time. The proceedings generally require the home owner (borrower) to appear in court, where the lender must prove the borrower’s delinquency on the mortgage. As the home owner, you will need to present any evidence that proves that the proceedings have been filed in error. If you are unable to demonstrate error, the judge makes the determination of the lenders right to take possession of the home. You are then obligated to adhere to that decision.

In a short sale, however, you are in charge of finding a buyer for your home; therefore no court appearance is required. The short sale will be an agreement between the borrower and the lender, sometimes with the help of a professional real estate agent. Before you attempt to sale the property, in order to avoid foreclosure, the lender must agree to the proceeding in that it brings in a lower amount of return than the property is worth. Keep in mind, the longer the delay in suggesting a short sale, the less likely the lender is willing to accept it.