What’s the difference between foreclosure and a short sale on a home?
Throughout our years as real estate investors in Metro Detroit, we’ve answered this question for a lot of homeowners, especially those facing financial issues related to their mortgage.
Here’s the rundown:
- A short sale is when the mortgage lender allows the homeowner to sell the home for less than what’s owed on the mortgage and forgives any remaining debt. The homeowner walks away without lingering debt – and without any proceeds from the sale.
- Foreclosure is a legal process by which the mortgage lender repossesses the house, essentially evicting the homeowner. The lender then puts the house up for sale to try and recoup the debt still owed on the defaulted loan.
Both foreclosures and short sales are processes for homeowners in financial distress. Unfortunately, both also have a negative impact on the homeowner’s credit score, tax return, and future ability to get a loan.
A short sale has less negative impact on credit score and tax return than a foreclosure, so it’s usually in the homeowner’s best interest to go the short sale route rather than foreclose. Foreclosure is often a last resort.
If you’re struggling to make your mortgage payments, the best thing you can do is call your lender, talk to them about your situation, and see what they can offer in terms of solutions. The sooner you reach out, the more options you will have. You may even be able to avoid a short sale or foreclosure altogether – so don’t wait until it’s too late.
At Mitten Made Properties, we’ve helped many Michigan homeowners facing foreclosure and other sticky financial situations, from bad tenants to divorce to unwanted inherited property. As professional home buyers, we can make you a fair cash offer on your home too – and we can even close in as little as two weeks!
Give us a call at (248) 883-3340 to learn more.