Differences Between a Short Sale and a Foreclosure
If you're looking to get a non-traditional deal on a new home purchase, you may encounter either a short sale or a foreclosure. These two terms refer to sales that are not usual. As a homebuyer, it's important to understand the differences between them and how each one might affect your buying experience.
What's a Short Sale?
A short sale is a situation where the owner has a strong motivation to hurry up and sell their home. In so doing, they're willing to sell for less than what they owe on the house. Homeowners have a variety of reasons why they might do a short sale. Their reasons might include a personal emergency, or they might be trying to protect themselves against a future foreclosure. In a short sale, the owner's lender has to be aware of the plan. In many cases, the lender is supportive of the short sale, since it keeps them from having to go through the long and expensive process of a foreclosure.
Short sales can represent great deals for buyers. However, since this type of sale is so unusual, the process of buying often takes a much longer time than a regular home purchase. You'll need to be patient, but if the sale does go through, your patience can certainly pay off.
What's a Foreclosure?
A foreclosure is a situation where the owner's lender is forcing the sale of the property due to unpaid mortgage payments. The lender is essentially taking back ownership of the property. The bank then puts the home up for sale as a foreclosure and is the official seller of the property. A foreclosure property may offer a good deal for a buyer, but the process may be long and drawn-out. Since the seller is the lender, they are not in any hurry to sell a property, and the transaction can be very complicated.
If you're interested in buying a short sale or a foreclosure, you should be sure to contact your trusted home mortgage professional for pre-approval and financing options. It's also important to utilize the resources of a trusted real estate agent that specializes in these types of transactions. These professionals can help you to successfully navigate through the red tape that often occurs with short sales and foreclosures.
Frequently Asked Questions
A short sale occurs when a homeowner sells their property for less than what they owe on the mortgage, often due to personal emergencies or to avoid foreclosure, with lender approval.
A foreclosure happens when the lender takes back ownership of a property due to unpaid mortgage payments and sells it, whereas a short sale is initiated by the homeowner selling with lender consent.
Lenders often support short sales because it helps them avoid the lengthy and costly foreclosure process.
Buyers should expect a longer and more complicated buying process compared to regular home purchases and should be patient throughout the transaction.
Buyers should contact a trusted home mortgage professional for pre-approval and financing and work with a real estate agent who specializes in these types of sales.
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