The Differences Between Short Sale and Foreclosure
As more homeowners find that they no longer have equity in their homes, selling a home can become a real challenge. Many homeowners are facing difficulties in paying their mortgages and many are seriously considering walking away from their homes and letting their bank foreclose instead. In recent months a short sale has quickly become a better alternative to foreclosure thanks to the Home Affordable Foreclosure Alternatives or H.A.F.A.
In a foreclosure your home is either sold in a trustee sale or a judicial foreclosure. If there are no bidders at the trustee sale the home automatically reverts back to the lender. Either way you lose your home and will need to vacate the premises shortly thereafter or face the possibility of being forced out by local law enforcement.
In a short sale the homeowner gets to sell his home as in a normal real estate sale. Although there are some additional steps required , the selling transaction will proceed like a normal real estate listing. You will get to work with your real estate broker, your home will be seen by potential buyers, you will receive offers and finally you home is sold.
A foreclosure creates major damage to your credit report and will show on your credit history for 7 years. You will not be able to qualify for a mortgage for at least 3 to 5 years with most lenders. In a short sale you may have some credit damage, but its significantly less than having a foreclosure on your record. As of this writing you may qualify for a conventional mortgage within a reasonable amount of time even with a short sale.
While either a foreclosure or a short sale can eliminate unwanted debts they both have the potential to create liability. A foreclosure has tax implications which means that the lenders loss may be reported as income to you. Tax laws have been modified in recent years to address these issues and its always a great idea to consult a tax specialist or an attorney.
A short sale that qualifies for H.A.F.A. Or Home Affordable Foreclosure Alternatives does not create any liability to the borrower. The lender is required, as part of the short sale agreement, to eliminate all future liability to the borrower if they elect to sell through a H.A.F.A. approved short sale.
California Short Sales
Los Angeles Short Sales
