The Difference Between Short Sales and Foreclosures

Hello, everyone. Welcome back to our video blog.

Unfortunately, over the past couple of years, short sales and foreclosures have been trending. The impact of these affect more than just the homeowner; neighbors and property values suffer as well.

When a homeowner discovers they are unable to make their mortgage payments, they have a couple of options. First talk to your bank to see what can be done. Sometimes, though, a homeowner’s only options are short sale or foreclosure.

What’s the difference between a short sale and foreclosure?

A short sale occurs when a homeowner is not able to make their payments and they owe more on their home loan than what the property is worth in the current market. The homeowner then works with a real estate agent to sell the home at the current market value and the bank accepts the difference.

Foreclosure occurs when the homeowner cannot make payments nor sell the home. The bank then repossesses the home.

A foreclosure is much more detrimental. Similar to bankruptcy, foreclosure is something a person will have to continually report while there are no requirements to report a short sale transaction.

Credit scores are affected differently as well. After a foreclosure you can expect your score to drop 200-300 points, while in a short sale a loss of 50 points is average.

When a property is vacant it can add an eyesore to the rest of the neighborhood and ultimately decrease the property value around it. So, if you know anyone who is struggling to make payments, please give us a call. We’d love to help.

Thanks for watching!