Difference in Short Sale and Foreclosure

There are many common misconceptions when it comes to short sales and foreclosures. Here are a few facts that might help clear them up. Foreclosure is when the bank reposesses your home due to failure to pay your payments. This can be a lengthy and costly proceeding to both you and the bank. Occassionally to avoid the time and money involved in a foreclosure, the bank will accept a short sale on the house instead. A short sale is when the bank accepts less in the sale of the home than that which is owed. For example, if you still owe $175,000 on your loan, but cannot make the payments, the house will be put on the market and buyers will make offers on the home for less and the bank may accept less than $175,000 and forgive the rest of the debt owed. At this point, the seller has no influence on the price the home brings, the negotiators at the bank are handling the proceedings and what they will accept. Realtors are key factors in this process and can make sure the bank gets the proper contracts and documentation, and keep the buyer informed throughout the negotiations because the negotiation process that typically take a day or two can take weeks or more commonly months. Both a short sale and foreclosure affect your credit negatively, but with a short sale you may be able to build your credit back up and buy a new home in a shorter period of time. Some people may ask why the bank would take less than what is owed? 1) They want to get the non-performing loan off their books as quickly as possible and 2) To avoid the full foreclosure process that can be money and time consuming