RealtyTrac, an online seller of foreclosed properties, reported 3,957,643 foreclosure filings — default notices, scheduled foreclosure auctions and bank repossessions — on properties in the U.S. in 2009. This was a 21 percent increase over 2008 and a 120 percent increase over 2007
Many times, the short sale and foreclosure options are closely related. For example, a short sale can be done at any point before or during the foreclosure process. Effectively defending a foreclosure action, can buy you the much needed time to identify a buyer and execute a short sale while you continue to live in your home and/or enjoy all the benefits of home ownership. A borrower who can no longer pay the mortgage should consult an Florida real estate attorney experienced in foreclosures. Deciding what to do next can be complicated and is best done with a lawyer experienced in real estate law and foreclosures.
More about Short Sales on Business Week , Realtor.org
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Short Sale vs. Foreclosure
There are many reasons someone may stop paying on a mortgage or loan on a property. It could be the result of a job loss, a financial setback because of an illness, accident or death, or because the terms of the loan have changed – the interest rate increases for example – and the person can no longer afford to make the payments. Those who have fallen prey to predatory lending may find themselves in this situation, as well.
When a borrower stops making payments on a loan secured by their property, there are usually three things that can happen when the home is worth less than the amount of the mortgage – a short sale, a foreclosure, or the owner can try to negotiate a loan modification. A short sale is when the property owner sells the property for less than is owed – a sale the bank or lender must agree to accept. A foreclosure action starts when the lender is trying to force a sale of the property – either through auction or by taking possession of the home through the courts and then putting it back on the market.
Foreclosure can be a long process, especially in a state like Florida. In the first two months of 2010, there were more than 100,000 new foreclosures filed in the state. These high numbers can overwhelm local courts, so in some counties, an aggressively litigated foreclosure can take two years or longer.
Deciding whether to try a short sale or to go through foreclosure depends upon your financial status, the home value, how easy or difficult the home is to sell, and the cooperation of the lender. Most people decide that either one is a preferalble alternative to bankruptcy.
Here are some differences in the two actions used to help decide:
A foreclosure --
- Will cause long-term damage your credit and may make it difficult to purchase another home.
- Is a public legal procedure and could cause stress and embarrassment for you and your family.
- Homeowners facing foreclosure can usually stay in their home throughout the legal process, which can take several years, allowing families time to save money and regain a solid financial footing.
- Doesn’t require you to deal with realtors bringing buyers into your home. Therefore, you don’t have to stage or maintain the home as you would if you were trying to sell.
A short sale--
- Will spare you the embarrassment of a public hearing and having your foreclosure listed in the newspaper and in court records.
- May allow you to recover your credit faster than a foreclosure especially if you intend to purchase another home.
- Will require you to list your home with a real estate agent and find a buyer.
- Will not necessarily wipe away the debt you owe your lender and may have tax consequences.
- Subjects you to the lender’s whim. If the bank says, “No” to your buyer, then you’re back where you started.
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