What is the difference between a short sale and foreclosure?
Both, are typically when you are not in the position to pay your mortgage and many times that you may be upside down on the mortgage as well.
Let’s say - you owe $500,000 and the property can only sell for $400,000, there’s a $100,000 difference.
FORECLOSURE
A foreclosure can be a tragic or devastating thing in your credit or even in your emotions, your everything. Just bad!
So, what happens in that case, the bank will take the property back because that’s collateral to them and made you promise to pay.
That loan is represented by a mortgage
Bank perspective - mortgage is an asset
Seller perspective - the mortgage is a liability
If you stop paying the bank, they’ll become a non-performing asset, and then at some point, they need to take the collateral back.
When they do that, it’s going to devastate your credit for the next several years. Also, remember that $100,000 difference?
The bank still has the right to be able to come back for that for any time.
SHORT SALE
Same scenario, you still have the asset and the liability, you're not able to pay your mortgage.
Here’s the difference - You find a SHORT SALE specialist, you place your property in the market, you can manage the time and AGAIN remember that $100,000 difference?
When we find that buyer, and the SHORT SALE specialist helps to negotiate that deficiency, then that $100,000 either goes away or you will be able to negotiate that to something that makes sense to you.
SHORT SALE IS THE RIGHT OPTION.
If you want to know more about short selling, I'm happy to help you out. Send me an email at Dan@greetingsvirginia.com or call me at 703-346-2776 and I’ll be glad to answer specific questions for you.
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