The real estate market has taken a hit unlike most anything that has been seen before. Certain markets, such as Las Vegas and San Diego, have been hit especially hard. More and more, homes are valued less than their purchase price, and many people have lost their jobs as well. This is a very unsavory combination for a number of reasons and, as a result, in some cases homeowners are looking for a way out. Foreclosure may be looming, however there are good reasons to consider executing a short sale vs foreclosure.

There is a particular stigma that seems to linger near the word foreclosure. Of course everyone’s situation is different, so the negative connotations may or may not be accurate. Still, the negative representation of someone who has been foreclosed on are difficult if not impossible to escape.

Foreclosures can also cause a severe drop in a person’s overall credit score. In some cases, the credit hit can knock 150 points or more from a score. Such an event remains part of an individual’s credit history for seven years as well. Of course a bad credit check can result in the inability to rent an apartment or even to get a job. It is not impossible to recover from such an event, but it has the potential to make everyday living a challenge.

Remember, when a bank sends a notice of foreclosure they often want the owners out of the property immediately. In the case of a short sale, this can be delayed several months and in some cases even longer. This can allow the person selling the home to locate a buyer and plan to relocate. Selling short can be an excellent way to postpone an eviction.

The benefits of executing a short sale are many. Such a sale, while not the preferred way to sell a home under normal circumstances, doesn’t come with the negative connotations that follow other methods and certainly foreclosures. Short sellers are viewed more as victims of the current financial environment. And while they can cause a drop in a credit score, this drop is typically far less severe than a foreclosure. They also appear differently on a credit report. This means renting or even buying again is far less dramatic.

Selling short is done in much the same way as a traditional sale. The owner of the home will discuss price with a buyer and, once settled, will then present this offer to the bank. It may seem strange to some, but many homeowners enjoy having even a little control over who purchases their home. Short Sales can offer this opportunity.

The bank decides, ultimately, whether to accept an offer, reject it, or negotiate with the potential buyer on the final price. In this regard, the seller has virtually no control. To help expedite the process and to ensure a smooth transaction, it may be wise to discuss the acceptable price with the bank prior to listing the home.

It isn’t always easy to decide on a short sale vs foreclosure. There are many variables, and each should be considered carefully. Short selling is often the path of least resistance however. Part of the decision should include discussing the situation with a tax professional. Next would be to work with the bank on a selling price. Banks are generally willing to work a deal that is beneficial to everyone.

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Mortgagees behind on their monthly house payment have the difficult decision of short sale vs foreclosure. There are pros and cons of either option, but the final determination is based on the amount of time and work to be spent.

A judicial foreclosure lowers one’s credit score up to four hundred points and remains on the credit reports for seven to ten years. The lending institution sues the borrower in court. If the amount due cannot be repaid, the court allows the bank to continue the process.

The financial institution schedules a date for public auction and advertises with newspaper notices and signs posted on the home from the local sheriff. During this time, the lender also pays for insurance on the property. If the borrower is unable to pay the amount due before the morning of the auction, the house is sold to the highest bidder. The bank will either take a loss or sue the homeowner for the difference owed.

Another alternative is deed in lieu in which the resident signs ownership of the home to a loan holder as payment. The property is then auctioned to whoever bids the highest. This is a feasible option for those who cannot afford workout payments or cannot find a buyer. This option is less costly for the bank since routine court fees are not needed. The mortgagee’s obligation is considered paid in full, but their credit score can be affected just as negatively as a foreclosure unless the account is reported as paid and settled.

A short sale ends the obligation of both first and second loans. Although this alternative shows on credit reports for up to seven years, the credit score is only reduced by no more than two hundred points. The homeowner may also be granted another loan in as little as one year later. This process sells the property for a reduced amount approved by the lending institution.

The borrower informs the bank of their intention to sell the home in this manner and works with the bank and an experienced realtor. Like any other property, it’s selling price is listed but at a lower amount. A potential bid approved by a mortgagee is received by the lending institution for their approval. If denied, modifications in the documents may be made such as the bid amount. Once approved, the title company receives the purchase details and proceeds as normal to complete the proper paperwork.

This process allows the owner to remain in control by choosing the realtor, approving showings, and picking the bid to for bank approval. The seller does not profit from the transaction, and any costs normally paid for by sellers are covered in the purchase amount.

Homeowners weighing the short sale vs foreclosure decision for their beloved home may feel more comfort from choosing the former option. Although they will not reap any profits, they have the power to decide who they wish to be awarded ownership of their once prized possession.

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