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  • Noud Bennetsen posted an update 1 week, 3 days ago

    It can be; loss of a job, loss of a spouse etc… Uncertainties such as these tend to lead to difficulty in keeping up with mortgage payments. In this case, a homeowner concludes that the best decision is to sell their home.However, the challenge in this is that the homeowner owes more on the mortgage and lease on the property, than what the home is actually worth. Let me give you an example. Imagine you have a home that you need to sell because you just lost your job and you can no longer make the mortgage payment.You owe roughly $250k on the home while the fair market value for it is only $150k.This leaves a $100k deficit on what is owed against what you can actually sell it for.In this situation where you owe more than what the home is actually worth, you have to request permission from the bank to accept a lower payoff than what is owed on the property. So basically, you have to ask the bank to take the $150k instead of the $250k that you owe.Funny how things turn out in life, right?In summary, the only way a short sale goes through is if the bank is willing to take that $150k.What is a Foreclosure?A Foreclosure is a legal process in which the bank goes through the court system to take back the ownership of the home.In most cases, the homeowner has either abandoned the property, stopped paying the mortgage or has voluntarily deeded the home back to the bank.Differences?There are 2 main differences between a Foreclosure and Short Sale.OwnershipIn a Short Sale situation, the homeowner actually still owns the home and in a lot of cases, still lives in the home as well.However in a Foreclosure situation, the bank owns the home. Most of these properties are going to be vacant because the bank is holding the ownership. TimeThe time it takes from contract to close is significantly different between a Short Sale and a Foreclosure. In a Short Sale, do not let the name be deceiving because it is anything but a short process. A Short Sale can take anywhere from 3 months up until 2 years. The reason a Short Sale takes so long is because the homeowner is actually in an active negotiation with the bank.Again, you’re asking them, will they take the $150k instead of the $250k.And in addition, the people that are handling the Short Sale files have a lot of files on their desk.It takes a lot of time to go through them and review all the different aspects in order to make a decision on the negotiations.In contrast to a Foreclosure, the closing process takes a pretty standard amount of time that actually goes by a little bit faster depending on your financing.This is mainly because of two things;The bank has already taken ownership of the home.The bank has already reviewed all financials behind the home and they know exactly what they need to do in order to sell it so as to cover their losses.Therefore, when you submit in an offer for the bank, they’re able to give you an answer back really quickly.

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