Whether you’re a buyer, borrower or seller, a short sale, and foreclosure each present different advantages and difficulties.
What Is A Foreclosure In Houston, Texas?
Having a home that is in foreclosure can be a daunting and life draining situation. Many Houston homeowners are unfortunately facing this dilemma day after day and in many cases of no fault of their own. According to Harris County court records, as of today, there are over 700 homes being foreclosed in May 2020. Many of which are a direct result of the COVID-19 virus.
A foreclosed home is one in which the owner is unable to make their mortgage loan payments and the bank repossessed the home” (source). If you are unable to make your house payments… your mortgage lender has the right to foreclose on your property so they can attempt to recoup the money that was lent to you. If you or anyone you know is facing foreclosure due to the COVID-19 virus or any other situations please seek help. The help may be in the form of speaking to a close friend or family member, calling your mortgage lender to see what programs are available to you or checking for information on U.S. Department of Housing and Urban Development (HUD)
Homes are typically foreclosed on when a borrower fails to make mortgage payments. The lending institution assumes ownership and possession of the property, evicting the borrower. These properties are then sold at an auction or more traditional means utilizing the service of real estate agents.
A foreclosure can:
- Damage your credit rating for up to 7 years
- Make it very difficult to obtain a mortgage for many years,
- Difficult to rent a home to live in or function similarly to how you were before your credit was impacted.
We don’t want to sound like a broken record but if you are facing a foreclosure where your family is being forced out of your home please seek the help you need.
Depending on the state that you live in… a foreclosure can work in different ways. Check out the foreclosure process information over here at the HUD Government website.
What Is A Short Sale?
Not sure what a short sale is, here is some need to know information. In a short sale, the home is still owned by the borrower.
The definition of a short sale is… “A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property, and the property owner cannot afford to repay the liens’ full amounts and where the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt” (source: Wikipedia).
In some cases, a short sale is an option agreed upon by borrowers and lenders. In a short sale, the home is sold for less than the outstanding balance of the mortgage. The unpaid balance (known as the deficiency) may or may not still be owed by the borrower.
This option typically takes some time, as a few different lending institutions may own the mortgage. All parties who have a stake in the property must agree to the terms of the sale, and a potential deal could fall through if even one lender doesn’t agree.
Short Sale vs Foreclosure – Your Options
While both options can have ramifications, a short sale often has less of an impact on the borrower’s credit worthiness. A foreclosure could impact a borrower’s credit score by 300 or more points, where a short sale may only dent the credit score by 100 points.
Borrowers who are foreclosed on are often ineligible to purchase another home for 5-7 years with a traditional mortgage, where under certain circumstances, a short sale borrower can purchase immediately.
As many Americans struggle with an economy that has yet to completely recover from the 2008 crash, folks are having a hard time making monthly mortgage payments. Choosing between being foreclosed and initiating a short sale (or a 3rd option… selling your Houston house fast )is an easy choice for a borrower having trouble paying their mortgage on time.
Sometimes, lenders are willing to work with borrowers to complete a short sale, to avoid the fees and time-consuming process of conducting a foreclosure.
Our suggestion is always this.
- Talk with your lender and discuss ways that they can work with you on your loan. We offer this service where we can help guide you in the right direction if you run into issues with your lender… just reach out to us on our Contact page and we’ll discuss your situation.
- Attempt a short sale or other programs your lender may have that forgives part of your loan, creates a new / more affordable monthly payment so you can get back on your feet, etc.
- If the bank isn’t willing to work with you very much… your best option may be to sell your house. Work with a local real estate house buyer service like Sell Your Homes Houston to sell your house fast for an all-cash offer. If you’re interested we can look at your situation and make you a fair offer on your house within 24 hours. Just fill out the form on our website over here >>
- The last resort is to let the house fall into foreclosure. This is the worst possible scenario. It’ll harm your credit and you could still be left with money owed to the bank even after the foreclosure is finished. That includes attorney fees, late payments, foreclosure fees. Keep in mind that the lender will attempt to recoup as much of the debt as possible.
By knowing your options, you may be able to dodge a significant impact on your credit score, allowing you to purchase a new home when your situation improves. A foreclosure on your credit report makes that possibility extremely difficult for 5-7 years, so if you have the opportunity, a short sale can be the better option.
Have a pending foreclosure? We’d like to make you a fair all-cash offer on your house.