As some homeowners make that calamitous decision between foreclosure or short sale, the chose seems daunting and akin to picking their own poison. These are the casualties of the housing downturn. Whether it’s a lost job, an adjustable rate mortgage or depleted equity, the situation appears hopeless. A decision should be made, only after careful consideration of the advantages and disadvantages of both options. It is strongly advised to get legal consultation before making a choice. Neither will allow an owner to go completely unscathed.
The foreclosure process is initiated by the lender and terminates the owners rights to the property. Normally homes are sold at auction or by the banks preferred realtor. Foreclosures can have a ten-year negative impact on one’s credit. Reports vary on the adverse blow a foreclosure can have, but anywhere from a 200 to 400 point hit is common. If a homeowner chooses the foreclosure route, then a five to seven year wait is required before becoming eligible for a new home loan.
A short sale on the other hand is selling the house for less than what is owed on the property. Most real estate experts emphatically support the short sale option compared to foreclosure. Short sales have less impact on credit scores than the alternative. Many banks are offering financial incentives to the seller to forgo a foreclosure and attempt a short sale. If a short sale owner has a desire to get back in the market, most banks will only require a two-year wait, assuming the sellers have stayed current on their financial responsibilities during that two-year period. When comparing the effects both have on credit scores, loan availability, taxes and other factors, short sales simply make more sense.
If an owner truly wants to keep their property, a loan modification might be appealing. If a lender agrees to this modification, the monthly payments can be adjusted to an amount that might make keeping that home more viable. Thousands of homeowners wake up every day with the stress of not knowing what to do, the worse thing is to do nothing at all. Contact your lender and let them know of your predicament, there are options. If an owner decides on a short sale, use a realtor that has had years of success with short sales. Please visit my website www.JohnnyBrooksHomes.com for helpful tips on buying or selling a home, scan my informative blogs, join my professional networks on Twitter and LinkedIn and easy access to view local area homes for sale in Davis, California and the surrounding communities.