While neither of these prospects has a home owner jumping and shouting with glee, when you look at the facts and have to come up with a recommendation in terms of short sale vs. Foreclosure. You sometimes do have to weigh the pros and cons of one up against the other.
Foreclosures in the US have not slowed and show no sign of bottoming out and lenders are becoming far more amenable to the short sale than they have ever been previously. Contrary to what the home owner may believe, it is myth that the lender likes foreclosing because they want to get their hands on your property and sell it for cash. They don’t, the last thing they need is any more of these properties on their hands.
Foreclosures are expensive and there is also the additional expense of paying property taxes and insurance once the property becomes an REO. A mortgage loan which is regularly paid is a performing asset, a foreclosure eats up the banks profits and is a non-performing asset. A loan that is not being paid by a lender is a non-performing asset. Banks are in the money lending business not in the real estate business.
All of these factors play a role in the foreclosure process and whether the bank is prepared to measure up what their losses would be in a foreclosure as apposed to a short sale. If the borrower is able to provide the bank with genuine facts regarding their financial hardship, they will give very good consideration to the request for a short sale.
But how does this affect the home owner? According to some experts, the home owner who takes the short sale route requires nerves of steel. According to others it is far better than a foreclosure because your credit record is not as badly affected.
If you take a look at the facts it is without a doubt that the home owners’ credit record will be more badly affected by a foreclosure. Once a foreclosure has taken place your credit rating will plunge by about 200 – 300%. With a short sale it is only affected to the extent of 80 – 100% and no foreclosure goes on your record.
With a foreclosure it is going to take a lender about three years before they will be prepared to offer you reasonable interest rates for credit again. But don’t get me wrong there are bad credit loans available; however they are extremely expensive because of the risk involved to the lender.
With a short sale however, it will probably take about 18 months for the lender to obtain economically viable interest rates for credit again. Essentially this means that the short sale home owner will be able to start taking a look at buying a new home again in a much shorter time frame, and they will be able to get a good interest rate.
If you fall prey to either the short sale or the foreclosure process, your primary concern has got to be salvaging as much of your credit reliability as possible. This has great relevance when choosing between a short sale or allowing the foreclosure process to forge ahead. If you are facing foreclosure and have no other alternative, don’t toss a coin between these two, try your very hardest to sell your property on a short sale, your recovery time will also be much shorter.
Short Sale vs. Foreclosure, the decision is up to you! Visit http://www.nphsrealestate.org/short-sale for expert advice and recommendations.
[tags]Short Sale vs. Foreclosure, Short Sale, Foreclosure, Sale,[/tags]
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