Short Selling a House vs. Foreclosure: What are Your Options?
As much as you might try to prepare yourself to handle life’s unexpected twists and turns, it can still come at you with a force that knocks you off your feet.
All of the training, dedication, and overtime in the world won’t necessarily keep you safe from getting laid off. A robust health insurance plan, paired with a healthy amount of savings, can’t stop a debilitating illness from crippling your plans—or your finances. Divorce, a death in the family, even a home that’s become expensive to repair, can put you painfully behind on your bills.
When life happens, it can begin to feel like all hope is lost—especially if the bank has warned that they plan to take away your house.
But, it’s important to know that a foreclosure start is not the end of the line for you or your home. You’ve got other options, including a short sale. In fact, the difference between short selling a house vs. foreclosure by the lender can make all the difference for you and your family—which is exactly why you should consider it.
Short Selling a House vs. Foreclosure
The process of foreclosure is a scary one and, once it’s been initiated by the bank, is hard to stall. Some lenders will allow you to refinance your loan or change your payment schedule to help you catch up as well as get back on track in paying what’s owed. They may also modify all the terms of your loan, including the interest rate, to get you to a number that works better with your current budget. It’s possible to have your payments temporarily suspended, too.
The problem is that these options are more easily accessible when you first start having trouble paying the mortgage. The more time and missed payments go by, the less flexible your bank will become—if they’re flexible at all.
At some point, the short sale process for selling your home may be one of the few options you have left. It may even be your best option from the very beginning if your bank won’t budge on terms or if caring for the home at any cost is just too big of a burden. Though taking this direction can also be stressful, it won’t weigh you down the way a foreclosure potentially can. Consider the following:
Facts About Foreclosures
- Though the laws governing foreclosure timelines vary from state to state, you will be required to vacate your home once the process is final—usually within 30 days. That gives you one month to find a new home, pack up your belongings, and schedule the movers. Failure to comply will only result in an eviction.
- On average, a foreclosure can drop your credit score from 85 to 160 points. Having a high score, to begin with, won’t insulate you from the impact, either. The lower your score drops, the harder it will be to buy—even rent—another home. In fact, most purchases, from cars to insurance, could become prohibitively expensive because of your credit.
- A foreclosure, unfortunately, will remain on your credit report for seven years.
- According to the Internal Revenue Service (IRS), a foreclosure—like any instance of uncollected debt—is a taxable event. That means if the bank writes off your unpaid loan, the IRS may see that money as income. When they do, they have the right to tax you on it.
- If the bank sells your home at an auction instead of repossessing it outright, you won’t necessarily be free-and-clear of debt just because the house gets sold. If the property sells for less than what you owed on the loan, the lender may sue you for the balance.
The Case for Short Sales
In contrast, when you sell your home for less than what is owed on the loan—called a short sale—you escape foreclosure by quickly attracting offers from buyers who want a good deal. Banks often agree to a short sale transaction because some money is better than no money. That makes this option a good one for many reasons.
To start, short selling your house can give you more time in your home as well as more time to prepare to leave it. How and when you move can even be negotiated with some buyers, especially real estate investors who pay all cash.
It’s even possible, depending on your circumstances, to get relocation assistance from a buyer. This makes getting to your next destination less stressful and more affordable.
Short selling your house vs. foreclosure benefits you in other ways, too. Your credit will still suffer as a result of missing mortgage payments, and the short sale will appear on your report for the next several years. However, the dent in your score won’t be nearly as deep which makes recovery from late and missed payments easier to reach. You’re also less likely to be hit with a lawsuit since the lender has to approve the short sale itself in addition to the short sale price. That means when you’re finally able to walk away, you have a better chance of really moving on.
But, taking the short sale route can come with complications—plus a lot of extra paperwork to file—and may require the help of a specialist. At the very least, you’ll want someone by your side to assist in negotiating with the bank, not to mention a buyer you can trust to actually close. Luckily, there’s one place where you can find both.
A Better Direction for Finding Your Best Solution
For many homeowners, the choice between short selling a house vs. foreclosure by the bank is a no-brainer. That doesn’t necessarily make the process any less painful to endure. After all, you’re leaving a house that was once your home. That’s why, for all of our clients here at Sell Your House Direct, we not only review how both of these options will affect their unique situations, we offer another direction that may work as a better—and less stressful solution—selling the house to us.
When you sell your home to SYHD, you can expect a fair and fast sale that prevents the bank from foreclosing.
Better yet, we’ll do all we can to close at a pace that suits your family’s needs best while also keeping the lender at bay. We can even help you find a new home and reserve the truck that gets you there. To make sure it all goes off without a hitch, we’ll also connect you with a short sale specialist.
We won’t charge you a dime for our services, either. That means zero commissions and zero fees. As a disabled veteran-owned business, we know how tough times can get. We believe they don’t have to be made any harder or more expensive just because of a few mistakes, either. So, if you let us help, we’ll make it our mission to help you move on with dignity.