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Foreclosures vs Short Sales

Foreclosures

  • Process starts when the owner misses consecutive mortgage payments.
  • Bank assumes ownership rights of the property.
  • Property can be sold via auction or through the Multiple Listing Service.
  • There are two types of foreclosures: Judicial and Non-judicial
  • House is sold lower than market value because banks are interested in a quick sale.
  • Takes on average 3 to 7 business days to receive a response from the bank after an offer has been submitted.

Short Sales

  • Process starts when the owner demonstrates hardship to the lender or when the owner misses consecutive mortgage payments.
  • Bank agrees to sell property for less than the seller’s mortgage because there is not enough equity to pay off the mortgage.
  • Money from sale goes directly to bank.
  • Property is sold lower than market value.
  • Typically takes around three to six months to receive a response from the bank after an offer has been submitted.
  • On average, credit ratings lower the same amount of points whether from a foreclosure or from a short sale (i.e., a 30 to 300-point deduction).