Short Sale vs Foreclosure NC – What’s the Difference?

Short Sale vs Foreclosure NC
Short Sale vs Foreclosure NC

Are you trying to understand what the difference is when it comes to the Short Sale vs Foreclosure NC question?

What Is A Foreclosure In Asheville, North Carolina?

A great definition is given by Investopedia “A situation in which a homeowner is unable to make full principal and interest payments on his/her mortgage, which allows the homeowner to seize the property.”  Typically the foreclosure process does not begin until three to six months after the first missed payment. The exact timeline is hard to predict because it will vary lender by lender and the workload of the attorneys who work for the lenders. 

The foreclosure process starts after the first missed payment. In most cases the servicing department or the lender will call and send the homeowner a letter inquiring about the situation, if not payment is made then the lender will appoint a substitute trustee. A substitute trustee is a fancy name for the individual or firm that is going to carry out the foreclosure process for the lender. A foreclosure can have a variety of negative side affects, the biggest one in many cases is the inability to purchase another home for a minimum of three years, typically it is five to seven years. To get more information about the foreclosure process information check out the HUD website, keep in mind that it is not state specific and talks in general terms.

What Is A Short Sale?

The biggest hurdle to overcome with short sales is the banks reducing their loan amount to facilitate a sale… “short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property, and the property owner cannot afford to repay the liens’ full amounts and where the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt” (source: Wikipedia)

In some cases, a short sale is an option agreed upon by borrowers and lenders. In a short sale, the home is sold for less than the outstanding balance of the mortgage. The unpaid balance (known as the deficiency) may or may not still be owed by the borrower.

This option typically takes some time, as a few different lending institutions may own the mortgage. All parties who have a stake in the property must agree to the terms of the sale, and a potential deal could fall through if even one lender doesn’t agree.

Short Sale vs Foreclosure NC – Your Options

While both options can have ramifications, a short sale often has less of an impact on the borrowers creditworthiness. A foreclosure could impact a borrower’s credit score by 300 or more points, where a short sale may only dent the credit score by 100 points.

Borrowers who are foreclosed on are often ineligible to purchase another home for 5-7 years with a traditional mortgage, where under certain circumstances, a short sale borrower can purchase immediately.

Thankfully our economy is on the upswing and the foreclosure crisis of 2008-2010 is behind us. However, foreclosures do still happen for a variety of reasons. Choosing between being foreclosed and initiating a short sale (or a 3rd option…  selling your Asheville house fast  )is an easy choice for a borrower having troubles paying their mortgage on time.

Sometimes, lenders are willing to work with borrowers to complete a short sale, to avoid the fees and time consuming process of conducting a foreclosure.

Our suggestion is always this.

  1. Talk with your lender and discuss ways that they can work with you on your loan. We offer this service where we can help guide you in the right direction if you run into issues with your lender… just reach out to us on our Contact page and we’ll discuss your situation.
  2. Attempt a short sale or other program your lender may have that forgives part of your loan, creates a new / more affordable monthly payment so you can get back on your feet, etc.
  3. If the bank isn’t willing to work with you very much… your best option may be to sell your house. Work with a local real estate house buyer service like Asheville Cash Buyers to sell your house fast for an all-cash offer. If you’re interested we can look at your situation and make you a fair offer on your house within 24 hours. Just fill out the form on our website over here >>
  4. Foreclosure. Last resort is to let the house fall into foreclosure. This is the worst possible scenario. It’ll harm your credit AND in North Carolina you can owe the bank money AFTER the foreclosure.

By knowing your options, you may be able to dodge a significant impact to your credit score, allowing you to purchase a new home when your situation improves. A foreclosure on your credit report makes that possibility extremely difficult for 5-7 years, so if you have the opportunity, a short sale can be the better option.

Have a pending foreclosure?  We’d like to make you a fair all-cash offer on your house.

Give us a call anytime at 828-222-6443 or
fill out the form on this website today! >>

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