Short sales have become a hot trend in the real estate market across the country. There have been thousands of foreclosures monthly which appears to grow continuously. The bureaucracy behind this problem continues to grow. Short sale and foreclosure differ in many ways. Many people have been informed with the definition of foreclosure and short sale through the media. However, the word is mentioned but the concept is not defined.
A short sale is not an easy process but it is the better of the two. It allows both the bank and the seller to sever their ties with the current mortgage loan. A short sale is when the property is put on the market by a Real Estate Broker for an asking price that is lower than the current mortgage loan against it. You would wonder why this type of transaction would take place. Well since the housing market crashed, most real estate properties are worth a lot less than they were several years before. This puts the current owner upside down in their loan. It puts the current owner in a catch 22.
When a buyer makes an offer on the property, the paperwork is sent to the bank that currently has the loan and requests that they accept the offer amount on the property. The bank has the option of accepting the proceeds from a short sale or denying the offer. That’s why it is very important to have an agent that is experienced in short sales and negotiating. The short sale process is anything but fast and easy. The negotiation process is what can become complicated and it can either make or break a deal. It is very important for a homeowner to contact a short sale expert when they first know that that are having trouble paying their mortgage. They want to get a short sale started before foreclosure proceedings are initiated. If successful, they will sell their home and payoff their existing mortgage with the balance being forgiven.
On the other hand, foreclosure proceedings happen when a mortgage loan goes into default. The bank that holds the loan can start the proceedings when a borrower is 30 days late but this does not usually happen. Most of the time, the borrower is 90 days behind and is not able to catch up. The bank must first serve the borrower a notice of default and give them 30 days to pay the past due balance. If this does not happen, the bank then files a notice of sale. The notice of sale states that the bank is taking possession of ownership of the property and it will be up for auction on a specific date. On the date of the sale, the current owner needs to have vacated the property and if they have not an order to vacate will be issued and executed by the courts.