Short sale service or Foreclosure service? Which would be the best? Let’s check their differences to decide upon it.
1. What is the Foreclosure & the Short sale service?
When the owner of the home stops the mortgage payment for a couple of months, then the mortgage lender can take back the property. This is called Foreclosure.
Most of the lenders wait for about 6 months of no payment before foreclosure. There are many procedures to be carried out before proceeding with foreclosure like sending a notice to the owner and take foreclosure actions when there is no initiative of paying the loan.
Short sale is the case where a financially distressed homeowner sells his/her property for an amount less than due on a mortgage. Short sale were common during the 2008 mortgage crisis.
2. Why one wants to go with a Foreclosure?
During this COVID pandemic, where people lose their jobs and are not possible to do mortgage payments, more properties fall into foreclosure. The reasons for choosing a foreclosure property are:
- Low price
In 2021, there will be more foreclosures, thus more lenders would act. More number of foreclosures would mean, the prices would drop down.
- Good potential Return on investment (ROI)
A good ROI could be obtained in foreclosure. This is because of the low price, through which one could re-sell the property with a profit or give them for rent.
3. Why one wants to go with a Short sale?
Those who want a discounted home and are not ready to work on its repairs usually go for short sale property. They come up with:
- Better Condition
Short sales are properties in better condition compared to foreclosures. This is because the owner of the property would be living there until it is sold. With a foreclosure, the previous owner might vacate the property for a long and the property would be vacant for a long time. So, damage in foreclosure properties is more.
- Slow Time Frame
Short sale takes time in its process. The bank checks upon the reason why the seller is going for short sale. Also, the financial basis is checked before the decision.
Which is better- Short Sale or Foreclosure?
- In short sale, once the seller accepts the offer, bank approval is required. Here comes a time gap and sometimes the deal may not happen. But one could get a mortgage loan for buying short sale and only the property needs to be inspected. While in a foreclosure sale, getting a mortgage loan is not possible, thus cash is needed. In some cases depending upon the house, one could get a mortgage loan on a real estate owned property, but if you buy at a discount, cash will be needed.
- Short sale properties are better in condition compared to foreclosures. Buying foreclosures at discount would be a frustrating process.
- Short sales are lengthy and involve paperwork transactions. While foreclosure is quick.
- A homeowner who has gone through short sale with only some restrictions could buy another home immediately. While in the case of a foreclosure, they should wait for years to purchase another home.
Buying short sale or foreclosure would the best depending upon the investing style you choose. An agent would help make a decision.
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