Whether you’re a buyer or a borrower/seller, a short sale, and foreclosure each present different advantages and difficulties. When it comes to short sale vs foreclosure, there are some huge differences. The major difference between a short sale vs foreclosure is what happens after each scenario.
What Is A Foreclosure In Arizona?
In simple terms… “A foreclosed home is one in which the owner is unable to make his mortgage loan payments and the bank repossessed the home” (source). If you stop making your house payments… your lender has the right to foreclose on your property so they can attempt to recoup their money that was lent to you.
A home is typically foreclosed on when a borrower fails to make mortgage payments. The lending institution assumes ownership and possession of the property, evicting the borrower. These properties are then sold at auction or more traditional means utilizing the service of real estate agents. A foreclosure can damage the credit rating of a borrower, and make it very difficult to obtain a mortgage for many years.
Depending on the state that you live in… a foreclosure can work in different ways. Check out the foreclosure process information over here at the HUD Government website. Learn more on short sale vs foreclosure
What Is A Short Sale?
In a short sale, the home is still owned by the borrower.
The definition of a short sale is… “A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property, and the property owner cannot afford to repay the liens’ full amounts and where the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt” (source: Wikipedia)
In some cases, a short sale is an option agreed upon by borrowers and lenders. In a short sale, the home is sold for less than the outstanding balance of the mortgage. The unpaid balance (known as the deficiency) may or may not still be owed by the borrower.
This option typically takes some time, as a few different lending institutions may own the mortgage. All parties who have a stake in the property must agree to the terms of the sale, and a potential deal could fall through if even one lender doesn’t agree.
Short Sale vs Foreclosure – Your Options
While both options can have ramifications, a short sale often has less of an impact on the borrower’s creditworthiness. A foreclosure could impact a borrower’s credit score by 300 or more points, where a short sale may only dent the credit score by 100 points.
Borrowers who are foreclosed on are often ineligible to purchase another home for 5-7 years with a traditional mortgage, where under certain circumstances, a short sale borrower can purchase immediately.
As many Americans struggle with an economy that has yet to completely recover from the 2008 crash, folks are having a hard time making monthly mortgage payments. Choosing between being foreclosed and initiating a short sale (or a 3rd option… selling your Arizona house fast )is an easy choice for a borrower having troubles paying their mortgage on time.
Sometimes, lenders are willing to work with borrowers to complete a short sale, to avoid the fees and time-consuming process of conducting a foreclosure.
Our suggestion is always this.
- Talk with your lender and discuss ways that they can work with you on your loan. We offer this service where we can help guide you in the right direction if you run into issues with your lender… just reach out to us on our Contact page and we’ll discuss your situation.
- Attempt a short sale or other programs your lender may have that forgives part of your loan, creates a new / more affordable monthly payment so you can get back on your feet, etc.
- If the bank isn’t willing to work with you very much… your best option may be to sell your house. Work with a local real estate house buyer service like We Buy Houses Arizona to sell your house fast for an all-cash offer. If you’re interested we can look at your situation and make you a fair offer on your house within 24 hours. Just fill out the form on our website over here >>
- Foreclosure. Last resort is to let the house fall into foreclosure. This is the worst possible scenario. It’ll harm your credit and you could still be left with money owed to the bank even after the foreclosure is finished.
By knowing your options, you may be able to dodge a significant impact on your credit score, allowing you to purchase a new home when your situation improves. A foreclosure on your credit report makes that possibility extremely difficult for 5-7 years, so if you have the opportunity, a short sale can be the better option.
To summarize Foreclosure vs Short Sale In Arizona…
Are you a homeowner in Arizona facing the possibility of foreclosure? If so, you’re likely experiencing a lot of stress and uncertainty about your future. At We Buy Houses Arizona, we understand how overwhelming this situation can be, and we’re here to help.
One of the most common questions we receive from homeowners in foreclosure is: what’s the difference between a short sale and foreclosure? In this blog post, we’ll break down the key differences and explain why a short sale may be a better option for you.
Short Sale Explained:
A short sale occurs when a homeowner sells their property for less than what is owed on the mortgage. The lender must approve the sale, and they typically agree to accept less than the full amount owed. This allows the homeowner to avoid foreclosure and the negative impact it can have on their credit score.
In Arizona, short sales are a popular option for homeowners facing foreclosure. They allow the homeowner to walk away from the property without owing any more money to the lender, and they may even be eligible for relocation assistance.
Foreclosure is a legal process that occurs when a homeowner falls behind on their mortgage payments. The lender can take possession of the property and sell it to recover their losses. Foreclosure can have a devastating impact on the homeowner’s credit score and their ability to obtain future loans.
Foreclosure in Arizona is a judicial process, which means the lender must file a lawsuit to take possession of the property. This process can take several months or even years, depending on the specifics of the case.
Short Sale vs. Foreclosure Explained:
The main difference between a short sale and foreclosure is how the homeowner’s credit is impacted. A short sale may have a negative impact on your credit score, but it is typically not as severe as a foreclosure. With a short sale, you may be able to buy a new home in as little as two years, whereas with a foreclosure, it can take up to seven years to qualify for a new mortgage.
Another key difference is the impact on your finances. With a short sale, you can avoid owing any more money to the lender, and you may even be eligible for relocation assistance. With a foreclosure, you may be responsible for paying any remaining balance owed on the mortgage, which can be a significant financial burden.
Why Choose a Short Sale in Arizona?
If you’re a homeowner facing foreclosure in Arizona, a short sale may be a better option for you. It can help you avoid the negative impact on your credit score and your finances, and it allows you to walk away from the property without owing any more money to the lender. Additionally, short sales are often faster and less expensive than foreclosures, which can help you move on with your life more quickly.
At We Buy Houses Arizona, we specialize in helping homeowners in Arizona avoid foreclosure through short sales. We have years of experience and a team of experts who can guide you through the process and ensure that you get the best possible outcome. If you’re facing foreclosure, contact us today to learn more about how we can help you.
Have a pending foreclosure? We’d like to make you a fair all-cash offer on your house.