Short sales and foreclosures are not one and the same, and today we’ll explain the difference between the two.
Despite what some may assume, short sales and foreclosures aren’t one and the same.
To give you a better idea of how these two things differ, let’s start by defining each. Foreclosure is a process by which a lender can recover the loan balance when a property is in default after the borrower has stopped making payments.
A short sale is a settlement negotiated with the lender in order to avoid foreclosure.
However, short sales and foreclosures aren’t the only options available to homeowners in distressed situations. You can also ask your lender about a loan modification agreement—which allows you to change the terms of your mortgage to compensate for financial hardship.
“Today’s lenders would much rather help you stay in your home.”
Today’s lenders would much rather help you stay in your home. After all, very few people would call a short sale or foreclosure an ideal solution. However, if remaining in your property just isn’t an option, then you should always try a short sale before defaulting to foreclosure.
Not only do short sales give you a greater capacity to negotiate, but they’re also less detrimental to your credit. And the little damage it may have on your credit score can be more easily restored than credit damage from a foreclosure.
When you go through a foreclosure, though, you have very little control over what goes on. Rather, you’ll simply receive a series of notices from the bank letting you know that they’re preparing to seize your property.
No matter how it plays out, being faced with the prospect of foreclosure is never pleasant or easy. If you ever find yourself in this situation and have questions about how best to handle it, please give us a call or send us an email. We would be happy to help you.