Homeowners that can’t meet the demands of lenders in a timely manner, whatever the reason may be, are subject to seizure and the loss of their home. This legal process, called a foreclosure, is where the owner’s right to the home is terminated and the home is then sold at a public auction.
A short sale is when a lender accepts a reduced payoff on a mortgage to avoid a foreclosure auction. Instead of the transaction being strictly between a buyer and seller, in a short sale scenario, the lender allows the borrower to sell the property for less than what is owed. The lender then takes the proceeds and will forgive any remaining difference.
The obvious benefit to the short sale process is that it provides short sale help and allows the borrower to avoid the severe credit report damage associated with a foreclosure. With a foreclosure you must wait four years to buy another home, as opposed to a short sale where you only have to wait two. Assuming you want to own another home, short sale would be the better decision. Also, a foreclosure can stay on a borrower’s credit report for up to 10 years and can take a very emotional and financial toll. Seeking short sale help can be very useful for many borrowers who owe more on their property than its fair market value.