Taking out a mortgage to purchase a home is something millions of people have done in the past. Unfortunately, some people are unable to repay this loan as intended. If you find yourself in this position, you may be faced with a short sale or foreclosure.
It is easy to believe that a short sale and foreclosure are one in the same, however, this is not true.
As a borrower, if you don’t make payments on your mortgage the lender is forced to start the foreclosure process. Soon enough, your home is sold at auction, or if unsuccessful, through a local real estate agent.
A short sale is not the same as foreclosure. With this, if the borrower is unable to make payments and the market value of the property is less than the balance owed, the lender may agree to accept a short sale offer. This means the lender is agreeing to take less money than what is owed on the home.
Points to Remember
By now, you should realize there are differences between a short sale and foreclosure. Here are several points to focus on:
- The best time for both options to be used which is early on.
- With a foreclosure the bank is the seller
- With a short sale the owner is the seller
- Method of sale – early on you have more options
- Impact on your credit score
- Impact on your ability to apply for loans (such as a mortgage) in the future
If you find yourself in a bad financial position regarding your home, focusing on these points will allow you to decide if a short sale or foreclosure is right for you. If these do not work for you, then bankruptcy may be a viable option.
An experienced lawyer can advise you what steps you should take based on your circumstances.
From a financial perspective, it is best to do whatever you can to avoid either option. If you have no choice, you should weigh the pros and cons of both and then decide what you need to do next.
It may be difficult for you to decide if a short sale or foreclosure in Philadelphia is the best option, so contacting an experienced attorney to discuss your situation is a good idea. Your attorney can provide you with professional advice that will allow you to make the right choice at the present time.