Financially speaking, foreclosure is the worst possible option when a person cannot keep up mortgage payments. Simply put, foreclosure means that a mortgage lender has taken possession of a home due to the inability of the homeowner to make timely mortgage payments. The lender owns the property and the borrower must leave it. Additionally, the borrower’s credit score is severely damaged and future borrowing for any purpose will be difficult if not impossible.
The best thing for a homeowner to do is to tell the lender immediately upon a change in circumstances that will make keeping up the mortgage impossible. At that time the borrower may ask the bank if they would consider a short sale. A short sale occurs when the borrower sells the property for less than the value of the mortgage. The longer a borrower waits and the higher his arrears, the more unlikely it is for the lender to agree to a short sale. Short sales also damage your credit score, it can lose up to 200 points due to a short sale. But, restoring your credit score takes less time than it does for foreclosure, and if you managed to hang on to a credit card or two and keep them up, the process of credit score restoration is a bit quicker.
A homeowner whose lender agrees to a short sale should use a real estate agent that knows this market niche. For more information about short sales or foreclosure, please give me a call.