Is a Short Sale better Than A REO or A Foreclosure
This is a common questions for homeowners in trouble with their mortgage company. Well lets take a look at each of them to make a determination. A short sale is when a homeowner sells a property for less than what is owed to the bank for the property with the banks permission. A foreclosure sale is when a property that was taken back by the bank ends up going to auction to try to recover for any losses. A REO is a real estate owned property or bank owned property that was to auction off, but it was not sold to a 3rd party at the foreclosure sale.
With an idea of each of those in mind now try to figure out which option can be more harmful to a homeowner whom is trying to save his/her credit, and suffer the least damage going forward. In all actuality, a short sale is the most beneficial of all the options mentioned. The reason why this is so is because the short sale looks much better on your credit report as a settlement, as opposed to a REO sale or a Foreclosure sale. With the REO sale it will have tax implications, you might want to talk to a tax attorney about that. A foreclosure can stay on one’s credit for up to 10 yrs. Trying to get any kind of loan with a foreclosure can be devastating, you would be considered among the highest of risk to a lender. On the other hand when you do a short sale which is settling what is owed on the account, that is much more attractive for future lenders that you might deal with after the short sale. It looks like you tried and succeeded at taking care of most of your obligation with your lender.
Making smart decision in tough economic times can be very beneficial to you and your family in the long run. Which can help you to recover from a bad situation much quicker in terms of your credit. Another attractive option is a Deed-in-lieu of foreclosure, which is where a homeowner gives back a property to the bank and walks away owning nothing. This is a more ambitious request from a bank. Some banks will do it if your have equity, which equals them recovering all or most of their losses; but they usually require you to make an attempt at selling the property in a short sale 1st, and if that does not work out then they will usually attempt to look at that option if it makes sense.
Always try to talk to your lender to see if they have any new and different programs available, because banks are always looking at new and different ways to try to recover their losses at the end of the day. Check on settlement where you can live in the property if you settle what you owe with them for in a large enough lump some settlement. This is primarily for someone who has had their mortgage for a long time and are close to paying it off, but instead of paying it off in payments they settle and owe no more. Always try to think creatively and bring up any unique option to your mortgage company, you never know sometimes. I have seen a lot of things work out in tough times that would not happen when the economy is thriving.
