Whether you’re a buyer or a borrower / seller, when considering a foreclosure vs short sale, each present different advantages and difficulties. If you’re facing foreclosure in Georgia and you think going through a short sale instead of losing your house to foreclosure is the way to go, then read on..
What Is A Foreclosure In Atlanta Georgia?
In simple terms the Georgia short sale definition is… “A foreclosed home is one in which the owner is unable to make his mortgage loan payments and the bank repossessed the home” (source). If you stop making your mortgage payments (you’re behind on the mortgage)… your lender has the right to foreclose on your property so they can attempt to recoup their money, through a foreclosure process, that was lent to you.
A home is typically foreclosed on when a borrower fails to make mortgage payments. The lending institution assumes ownership and possession of the property, providing the borrower with a foreclosure eviction. These foreclosure properties are then sold at foreclosure auction or more traditional means utilizing the service of Georgia real estate agents. One of the consequences of foreclosure is that it can damage the credit rating of a borrower, and make it very difficult to obtain a mortgage for many years.
Depending on the state that you live in… the foreclosure process can work in different ways. Check out the foreclosure process information over here at the HUD Government website.
What Is A Short Sale In Real Estate?
In a short sale in Georgia, the home is still owned by the borrower.
The definition of a short sale is… “A 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)
The term ‘lien’ refers to a very specific type of security interest, being a passive right to retain (but not sell) foreclosure property until the debt or other obligation is discharged.
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.
Foreclosure vs Short Sale – 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. Pursuing a short sale may be how to prevent foreclosure in Georgia for your family.
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.
As many Americans struggle with an economy that has yet to completely recover from the 2008 crash, folks are having a hard time making monthly mortgage payments. Choosing between being foreclosed and initiating a short sale (or a 3rd option… selling your Atlanta 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 foreclosure vs short sale, to avoid the fees and time consuming process of conducting a foreclosure.
Our suggestion is always this.
- 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.
- 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.
- 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 Breyer Home 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 >>
- Foreclosure. Last resort is to let the house fall into foreclosure. This is the worst possible scenario. It’ll harm your credit and you could still be left with money owed to the bank even after the foreclosure is finished.
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 and close on your timeline. Selling your house with Breyer Home Buyers is so easy that you just sign the contract one day and show up for your check another day.