Blog Details

Introduction

When a foreclosure is about to happen, homebuyers ask whether doing a short sale is also an option. Both of them will have huge financial and personal implications; therefore, the decision as to which alternative is right for you depends on your given situation. The blog tries to help New Jersey homebuyers know about the distinctions existing between the cases of foreclosure and short sale.

1. What is Foreclosure?
   

   Foreclosure is the process where the lender takes possession of the house, subject to deficiency judgment, in cases where the owner of the house has stopped paying his mortgage. Once it starts, the owner of the house is given a certain period during which he will catch up on payments or sell the house. If neither is done, then the house is sold at an auction; the balance due on the loan is recovered by the lender with the aid of the funds raised by the sale.

2. What is a Short Sale ?

   A short sale is simply the selling of the property for less than what is owed on the mortgage, but with the approval of the lender. The lender agrees to accept the sale price as full payment on the loan, even though it is “short” of owing. This means homeowners avoid foreclosure and walk away from their mortgage free of debt.

3. Key Distinguishing Points: Foreclosure vs Short Sale
   
   

   It may be confusing and hard to differentiate between foreclosure and short sale if one is choosing between them. But the main factors are as follows:

   Effect on Credit Score:
   Foreclosure contributes more to your credit score, lowering it by 200-300 points. Compared to this, a short sale reduces the credit score by 100-150 points and is something the least awful of the two.

   Eligibility for Future Loans:
   For homeowners who go through foreclosure, they might need to wait seven years before being eligible for another mortgage, whereas homebuyers who have completed a short sale may be eligible for another loan after two years.

   Deficiency Judgments:
   In some cases, the lender may obtain a deficiency judgment after foreclosure where you are required to add up the balance of the mortgage outstanding minus the price sold at the auction. In a short sale, lenders typically agree to waive the deficiency, which means that there is more financial security

4. Advantages and Disadvantages of Foreclosure
   
   

   Although foreclosure is among the worst things that can happen to a homeowner, for some, it will be the only way out. Here are the positives and the negatives:

   Advantages:

   You will have sufficient time to look for a new house when foreclosure becomes final.  At times, the government offers programs that benefit homeowners by giving help in foreclosure.

   Disadvantages:

   Severely bad impact on your credit, making access to future loans or even renting a house difficult.  .

   A possibility of deficiency judgment, where you may be forced to pay money after your house is sold.  .

   Emotional and financial anguish in the process of foreclosure.

5. Pros and Cons of a Short Sale
   
   

   A short sale can sometimes present the homeowner with a few alternatives to foreclosure. This has many advantages and disadvantages:

   Advantages:

   Less damaging to your credit report compared to foreclosure that lets you recover financially sooner.  

   You’ll have a chance to negotiate with your lender for waiving any deficiency balance, so you might not have to pay any debt that is remaining.

   You will have control over the sale process as you can sell your home at a time that suits you better than having it confiscated through an involuntary auction.

   Disadvantages:

   Time-consuming and complicated: Short sales require lender approval, which involves negotiations between different parties.

   You might still be liable to pay taxes on the forgiven debt, depending on your financial situation and the state laws.

   There may not be enough money from the sale of the house to pay closing fees, realtor commissions, and the other costs of the foreclosure

6. Factors to Consider When Deciding Between Foreclosure and Short Sale
   
   

   A short sale will generally cause much less damage to your credit and financial futures than a foreclosure. If you are eligible for a short sale, this may be the best alternative in order to prevent long-term harm.

   Timing:
   Foreclosures usually take less time, and you might need to arrange a new home sooner. Although short sales are kind of complicated, they enable you to be in control of the timeframe for your relocations.

   Emotional and Psychological Impact:
   Foreclosure is very stressful and too long of a process, even a process that makes you feel you have no control over the situation. Short sales are challenging but allow more involvement and closure.

   Future Homeownership: 

   If you ever look to purchase another home in the future, a short sale may enable you to reenter the housing market more quickly than if you go through foreclosure.
   

Why Us?

Professional Consultation: We will counsel you on whether you would like to do a short sale, perhaps even a foreclosure that suits your best interest.

Negotiation Ability: Our team has the negotiation skills to ensure proper communication with lenders in order to deliver the best possible outcome.

Compassionate Support: Dealing with a foreclosure can be an emotionally and financially excruciating process. Our compassionate team is at your side throughout each step of this procedure.

Tailored Solutions: Every situation is unique, and hence we offer personalized solutions customized according to the particular needs of every homeowner.

Contact Us Today

Whether you are a New Jersey homeowner in foreclosure or not, these are difficult times that you do not need to face alone. The Foreclosure Solutions will guide you through the best decisions for your future. You can reach us at:

Phone: (877) 928-8080  

Email: info@theforeclosuresolutions.com

 We’ll work with you in protecting your home and your financial well-being.