Buying a home is an investment for life, and there must be due diligence. Homeowners will find several ways to buy a home of their choice. They may choose ‘distressed’ homes available; those on a short sale or foreclosure as they are often available for 30 percent less compared to new ones. Ocala, Florida real estate agent Fred Franks of Local Realty Service and Katrina Barone of Housesforsaleinocalafl.com discusses more on the distressed homes for homeowners so that they can snag a deal short sale vs foreclosure in Orlando, Fl.
Defining a Short Sale
A short sale takes place when a borrower is unable to make payments towards the mortgage and owes more than it is worth in the market. It may take place when the homeowner may be current on their mortgage payment. Even if the homeowner is ready to sell, it can take place if the lender approves the sale. Realtor sells the property, often initiated by the homeowner and processed like any other home sale.
Know the process of a Short Sale
One reason, the lenders hesitate to accept the offer for a short sale is because the proceeds from a sale fall short of the mortgage balance often called the deficiency. The short sale agreement may not release the borrower from the obligation to repay the deficiencies unless agreed.
A short sale may take up to 6 months to close; there are rules to conclude the sales easier and faster. The lenders must respond to the offer in 30 days of receiving the request or offer.
When the homeowner defaults on the mortgage payments, taxes or insurance, the property comes into the possession of the lender pledged as collateral for a loan and the homeowner loses the title hold. The lender puts the property for a sale to recover the mortgage balance, upon the foreclosure of the property. In Orlando, Foreclosure is a judicial process since Florida is a mortgage state.
Know the process of a Foreclosure
The foreclosure process in Orlando, Florida is a judicial process wherein the property owner, holds the title, must visit the court to rectify it. The process is time-consuming, may take five to seven months or longer to resolve. A foreclosed property once purchased, the original owner cannot take back the title; there is no redemption period.You can find a lot of Orlando bank owned homes for sale, with one click of your mouse by going to Localrealtyservice.com
The foreclosure of the property takes place even if the borrower faces an ill fortune, ill health, or unemployed. The lender has the right to accelerate the foreclosure immediately on default. The borrower has a pre-closure or grace period to recover from the default by selling the house, make back payments or come to a compromise with the lender. Notice of Default (NOD) formalizes the foreclosure of the property.
After the 90 day grace period, the lender can put the property up for an auction on the courtroom steps, for cash. The proceeds from the foreclosure sale clear the loan balance, if there is a balance left other lien holders in the house are paid using the amount. Remaining balance goes back to the original owner if there are no lien-holders.
In case, the property does not sell at an auction, the ownership of the property transfers to the lender and the bank or Real Estate Owned (REO). A homeowner can purchase the foreclosed property at a better price.
Benefits of Short Sale vs Foreclosure
- Protects credit
- Prevents foreclosure
- Saves money
- Helps the lender
- Benefits the housing market
- Presents an opportunity for the realtor
- Benefits investors
- Homeowners play an active role
- Helps seller to avoid scams
- Offers peace of mind
After a Short sale, the lender does not pursue deficiencies in a mortgage, paid or negotiated, this affects the credit score. It lowers the score by 50 points for not more than 18 months. Deficiencies are pursued in a foreclosure and affects the credit score by 250 to 300 points and remains for about 10 years of credit history.
A short seller can apply for a new loan based on criteria affecting future loans while after a foreclosure; the borrower must wait for 24 to 72 months and affects future loans. A foreclosure affects the new employment while a short sale does not affect current employment.
Before beginning your house hunt, home buyers should know both the merits along with the demerits of purchasing either kind of "distressed" homes: foreclosures and short sales.