Short sale and a foreclosure. - What is the difference ?
A quick over view of the two terms...
Short sale is when you must sell your home for less than what you owe on it. For example: a homeowner who is behind at least two payments and can show a lack of ability to pay the mortgage may qualify for a short sale, but the specific requirements are up to the bank that holds the loan on the home. The Phoenix Metro Area is flooded with short sales at this time and more to come. Homeowners find themselves in this situation due to the dropping prices of real estate, loans that are adjusting upward beyond their means to pay and many other situations including loss of a job. Unfortunately, most banks won't talk to you about a short sale until you are already in trouble.
Foreclosures happen when the bank takes back the property from the homeowner because of their inability to pay the mortgage. There is a process involved that includes pre-foreclosure, that is, when the bank gives a notice of default (NOD) and takes legal steps to reclaim the property from the homeowner. In Arizona the process is publication of the Trustee Sale Notice. On the 91st day from the notice publication, the property will be sold at auction at a specified location. If there are not other bidders on the stated bid (stated amount) on the property the bank will take the property back at the "credit bid" (what is actually owed). Once the bank has taken back the property it is known as a Bank-Owned property or REO. Neither of these situations is ideal, they are a fixture in our Arizona real estate at this time. .
As soon as you think you might have a problem, call your Lender and get as much information as you can. You may be able to save your home, or at least, make informed decisions that can help reduce your loss and damage to your credit. Contact your Realtor and speak to them about helping you with a loan modification with the lender or take steps to put the property on the market as a short sale. Your professional Realtor should know all the appropriate steps expedite the lengthy short sale process. Contact me if you have any questions or if you or someone you know needs some help with there home in this difficult time we are all facing.
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