The Difference Between Real Estate Foreclosures And Short Sales
If you’re in the market to buy or sell a home, you’ve probably heard a lot about foreclosures and short sales. However, many homeowners and buyers delving into the real estate market are unclear about what these terms actually mean.
Although foreclosures and short sales are similar, there are quite a few differences. A foreclosure is when the lender takes possession of a mortgaged property because the owner is not able to keep up with the payments.
A short sale is when the owner sells the home at a price lower than the balance owed on the real estate. They can then use the proceeds of the sale to pay off a portion of the mortgage. A short sale usually occurs when the homeowner is unable to make the mortgage payments but the value of the property has dropped. The bank then chooses to sell the property and bear the loss, as this is sometimes better than forcing the homeowner into foreclosure.
Impact On Credit Score
One of the biggest differences between a foreclosure and a short sale is their effect on your credit score. A short sale will be reported as paid in full or negotiated, which will only lower your score by approximately 50 points and might affect you for 12-18 months. However, a foreclosure can reduce your credit score by up to 300 points and may affect you for more than three years.
Influence On Future Employment
A short sale will have no effect on your future or current employment status, as it will not appear on your credit report. However, a foreclosure will show up on your credit report. Some employers run credit checks on potential employees for certain positions. If you are discovered to have gone through a foreclosure, this could have a negative impact on your chances of being selected for a job.
When it comes down to it, although selling your home as a short sale is not ideal, it is a much better alternative than a foreclosure. If you have any questions about the difference between short sales and foreclosures in the real estate market, please call me at 562-879-9677 or email me at firstname.lastname@example.org for additional information.