Getting the Elephant Off of Your Chest: Short Sales and Foreclosures

The current economic crisis in the US stemming from the crash in the housing market and rising unemployment has left many homeowners facing tough decisions about their homes. If they are fortunate, they owe less than the house is worth and can sell (if they need to) the property through traditional channels, pay off their loan and move on with their lives. However, if you are one of the millions of Americans facing foreclosure or even bankruptcy, you certainly have many questions about your options and the possible impact of those options.

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What Is A Short-Sale and What Does It Mean?

A Short Sale is the process by which the borrower convinces the lender that due to economic hardship they cannot make payment on the mortgage and the lender is willing to accept a sale price of less than what is owed on the property. The length of time to complete a Short Sale varies widely, but is usually less than that for a foreclosure.

There is no cost to a Short Sale. Realtor commissions and fees are paid by the lender. A Short Sale is much less damaging to the homeowner’s credit than a foreclosure and the terms of the Short Sale can vary depending on the lender. There is a 2 year wait after a Short Sale before you can qualify for a new mortgage.

What Is A Foreclosure and What Does It Mean?

A foreclosure is a legal process that results in the lender regaining title to the property due to nonpayment by the borrower. In a foreclosure, the Court can award a “deficiency judgment” to the lender that is determined by the difference between what the property sells for (minus expenses related to the sale) and what the borrower still owes on the mortgage. The length of time required to process a foreclosure can vary widely, but recently has been averaging 6-18 months.

Foreclosure comes with some heavy penalties to your credit. The foreclosure itself remains on your credit history for 7 years. The judgment’s statute of limitations is generally 20 years. You must wait to qualify for a new mortgage for 5 years AND the judgment must be satisfied before you can qualify.

How Do I Find Out What My Options Are for My Specific Situation?

You will want to work with a Realtor who is experienced with Short Sales and Foreclosures and who can help to evaluate your options given your specific circumstances. You will also need to discuss your options with your lender.

If you have questions, please feel free to contact me anytime by phone (561-707-7960) or by email at

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