In the aftermath of the recent recession, short sales have become sort of a hot trend in the real estate market. When the owners of homes or properties can no longer make the agreed payments on their mortgages and need to evaluate short sale vs foreclosure, they may have to resort to short sales as foreclosure can have much worse consequences. Generally, in such cases the home is worth less than the amount of the home loan that needs to be paid off and the owner is trying to sell off the home as quickly as possible in order to at least partially honor the payment terms of his or her mortgage. Usually a short sale is resorted to in an effort to avoid foreclosure.

On the other hand, a property may end up being foreclosed when the borrower has not been able to make payments for a relatively long period of time. Through foreclosure the lending institution takes back the possession of the home or property that the loan originally secured. When it comes to short sale vs foreclosure, a short sale is always preferable and therefore, many times lenders work with homeowners to set up payment plans to avoid foreclosure. Sometimes though, there is little choice for the lender than to take back their property and foreclosure is the only option left.

You may wonder about the differences between short sales and foreclosures. The basic difference between short sales and foreclosures is that while in short sales, the homeowner is the one who accepts or rejects the offers for the sale of the property, in foreclosures, the homes get repossessed by the bank or lending institution that did not get paid the agreed upon payments. Even as in a short sale the owner still has control over the home, in a foreclosure, those who want to purchase the home will have to work with the bank or lending institution directly.

In many states, even when a short sale is resorted to, banks or lenders let the seller off scot-free with no money owing, even though the proceeds from the short sale do not quite cover the total amount of the mortgage loan outstanding. A lender that goes in for a normal foreclosure is likely to lose more money that way, some estimate as much as over 40%, while a short sale can cost the bank 20% or less. Another advantage to both the seller and the lender in a short sale is that while the seller stays in the house until it is sold, the lender is not left with a dilapidated, empty house on its hands. Whether the lender would let the seller go for a short sale or would enforce a foreclosure on the property would depend on a host of considerations and the answers to various short sale and foreclosure questions.

Short sales may be sometimes effective options to stop foreclosures. The short sale may not affect your credit report for longer than five to seven years. There have been cases when people have successfully applied for a new mortgage after only a year or two and were accepted. Whether your mortgage application would be successful depends a lot on your current circumstances when you apply. It is possible that you may now have good and steady employment, whereas when you were forced to apply for a short sale in the past, you may have been laid off and were without work.

But it is important to remember that even if you have been able to clean your credit, your previous lender has a right to come after you with the deficiency judgement and try to reclaim the money they lost with the short sale of your house. A judgement would remain enforceable for as long as the statute of limitations exists for it.

Author Bio: short sale vs foreclosure foreclosure questions stop foreclosures

Category: Finances
Keywords: short sale vs foreclosure, foreclosure questions, stop foreclosures