We Buy Houses In Plainfield New Jersey. Whether you’re a buyer or a borrower/seller, a short sale, and foreclosure each present different advantages and difficulties. We are homebuyers in NJ and in this article, you will learn the difference between short sale and foreclosure and you got the answer of “What is a short sale vs foreclosure”?
What Is A Foreclosure In Plainfield NJ?
In simple terms, “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 house payments, your lender has the right to foreclose on your property so they can attempt to recoup the money 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, evicting the borrower. These properties are then sold at auction or more traditional means utilizing the service of real estate agents. A foreclosure 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, a foreclosure can work in different ways. Check out the foreclosure process information over here at the HUD Government website.
What Is A Short Sale In Plainfield NJ?
In a short sale, 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)
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 – Your Options In New Jersey
While both options can have ramifications, a short sale often has less of an impact on the borrower’s 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.
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 Plainfield NJ house fast)is an easy choice for a borrower having trouble 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.
- 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 programs 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 home buyer service like DNT Home Buyers to sell your home 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. The 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.
Short Sale vs Foreclosure – Pros and Cons
Both short sales and foreclosures come with their set of advantages and drawbacks. Understanding the pros and cons of each option can help you make an informed decision based on your specific situation.
- Short Sale – Pros and Cons
One of the significant benefits of a short sale is that it typically has less severe consequences on the borrower’s creditworthiness compared to a foreclosure. While a short sale may lead to a credit score reduction of around 100 points, a foreclosure can result in a much more substantial credit score drop, affecting your financial standing for years. Additionally, a short sale may offer borrowers the chance to purchase another property sooner under certain circumstances, as opposed to the waiting period imposed after a foreclosure.
However, a short sale also has its downsides. The process can be lengthy and complex, involving multiple parties who must agree on the terms of the sale. If any of the lien holders or stakeholders involved do not consent to the short sale, the deal could fall through, leaving the borrower in a precarious situation. Moreover, depending on the terms negotiated with the lender, the borrower may still be responsible for the unpaid balance (deficiency) after the short sale is completed.
- Foreclosure – Pros and Cons
Foreclosure, while being the last resort, does have certain benefits for distressed borrowers. Going through foreclosure can free the homeowner from the burden of mortgage payments when it becomes unmanageable. Additionally, after the foreclosure process is finalized, the borrower is no longer responsible for the property or its debts.
However, the drawbacks of foreclosure can be significant. Aside from the severe blow to the borrower’s credit score, which can last for 5-7 years or more, foreclosure can have emotional and psychological impacts as well. Losing one’s home through foreclosure can be a stressful and traumatic experience, affecting the overall well-being of the individual or family involved. Furthermore, there is the possibility that even after the foreclosure, the borrower may still owe money to the bank if the sale proceeds did not cover the full mortgage debt.
Sell My House In Plainfield NJ
By knowing your options, you may be able to dodge a significant impact on 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.
If you have decided to sell your house in NJ to avoid foreclosure, you can call professional home investors like DNT Home Buyers. We are your local Plainfield home buyers and we offer cash for houses in New Jersey. We’re passionate people and we’re happy to help you find answers to your toughest questions about your situation.