A short sale and foreclosure are two possible outcomes of a borrower defaulting on a mortgage. A short sale is the process of selling the home for less than what is owed on the mortgage; while a foreclosure is the process of the lender taking possession of the property after default. In certain cases, lenders may prefer that the house be sold at a small loss than have to face the expense of foreclosing on the property. Also, once the property is foreclosed on, the lender would have to sell the house, which may or may not prove to be profitable.
Benefits of a Short Sale to Homeowners
The benefits of a short sale to the homeowner are:
- Less negative impact on their credit rating
- More control over what will be owed on the remainder of the loan; and
- Less stress than the foreclosure process
Basically the homeowner is selling the property in a short sale; foreclosure is losing the property. They are obviously trying to get the best price possible, but they are still just selling the property. This is considerably less stressful than losing the property in foreclosure. Likewise, in a short sale, the homeowner will avoid having a foreclosure noted on their credit report, which will drastically help them in their future financing endeavors.
Benefits of a Short Sale to Lender
The benefits of a short sale to the lender are:
- Saving legal fees
- Expediting the process of resolving the delinquency; and
- Retaining control over profits
In the short sale process, the lender and homeowner agree to the amount the home must be sold for in order to go through with the sale. This gives the lender control over what they will accept and how much money they will get at the end of the day. It saves a great deal of money and headache over the foreclosure process and is over much more quickly. If the lender were to foreclose, they would not only go through that process, but then would also have to find a new buyer for the property. This is time consuming and does not guarantee any better sale price for the lender.
When to Talk to a Foreclosure Defense Attorney
Facing foreclosure is a difficult and stressful time for a homeowner. Having the advice and guidance of an experienced attorney will make the process much easier and will better ensure that you are not taken advantage of by the lender.
