The Lowdown on Short Sale Vs Foreclosure

The debate over whether short sale or foreclosure is best rages on but in the end it ultimately boils down to which one suits you best and options available at the time you set out to buy property.

If you are out to buy property on the cheap then we would recommend you consider property up for short sale or foreclosure properties. The debate over short sale vs foreclosure rages and each has its proponents. In both instances property sells below its market rate or the sum owed but there is a difference between short sale and foreclosure. This is what you should know about both in order to make an informed decision.

Short sale

Short sale meaning becomes clear when you learn that a property owner is faced with mortgage payments whose sum is more than the market value of the property and he decides to sell it at a loss after obtaining lender’s permission. The short sale is a borrower’s last chance to sell the property and pay off part or whole of the mortgage to the lender and this is one of the benefits of short sale from a seller’s perspective.  The benefits from a buyer perspective is that the property has been occupied and is well maintained at the time of sale and that he is paying far less than the market rate for a similar property. For the buyer the drawbacks of shortsale are that the lender is involved and the paperwork could be cumbersome and he may pay more than he would for a foreclosed property. The drawback is that process of acquisition is a lengthy one.

Foreclosure

Foreclosure meaning becomes clear when you understand that the lending institution takes over the property when the borrower-owner of the said property consistently fails to make mortgage payments despite notices. The lending institution then sells off the property in order to recover monies owed to it. The benefits of foreclosure for the property owner are dubious since he may not be entirely released from his obligation but this depends on the terms agreed to. Here at ABC Finserve we advise people well in advance about the benefits of foreclosure over short sale and the drawbacks too. If you happen to be a property buyer then the benefits of foreclosure are that you could get it a very low price. The drawback for the buyer is that the particular property may have remained closed and neglected while the lender finally makes a decision to sell or auction it off, necessitating extensive repairs. Another one is that there may be a sort of social stigma to buying such “distress” properties.

In either case there are legal issues involved since the property owner is not the actual owner, which, in this case, is the lender or bank. One thing to keep in mind is that you may not be able to get immediate possession until all formalities are completed. Where banks are concerned, the process of approval could take months so remember this. If you wish to buy shortsale or foreclosed properties, it is better to know what is involved in each type of transaction by consulting our experts.

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