subject: Foreclosure Or Short Sale - Which Is Better? [print this page] If youre struggling to meet the payments on your home, have fallen into delinquency and you can see no light at the end of the tunnel then you may have to concede to losing your home. While this is likely to be an unpleasant experience to any person, it's best to make things go as smoothly as possible by weighing up your alternatives and making the best possible decisions.
One thing that any individual must not do is commit a strategic foreclosure. A strategic foreclosure is basically a scenario when although the homeowner is able to meet the expense of repayment of their loan, they still choose to walk away from the house because the value of the loan is greater than that of the property. This is considered a highly unprincipled practice and a thing that's greatly looked down upon by the government and lenders. Committing a strategic closure would probably leave the individual unable to ever be accepted for a mortgage again.
If it's a case of a person simply not being able to meet their financial commitments, then foreclosure is not considered to be an unprincipled practice. A person may have recently lost an income through no fault of their own, for instance, leaving them short of the money that's needed to repay their loan. Even though financial institutions do settle for this as something that just cannot be helped, sometimes, there are still penalties incurred so as to help safeguard the market from exposure to toxic loans in the future. Somebody who has undergone foreclosure in this manner won't be in a position to purchase a new home for five to seven years, depending on the circumstances.
One more alternative available to those who are struggling economically is to sell their house so as to settle the debt. However, with a flailing economy, many would find that the valuation placed on their home will not completely settle the loan and there will still be a balance left behind. Negotiating with the lender might make them agree to a short sale, which basically means that they will settle for a lesser amount for the house that will leave them making a loss. In doing this, the bank can restrict their losses while taking some loss is inevitable, and it also means that they dont have another empty property on their inventory. The banks are somewhat easier on house owners who take this alternative since a compromise is madeGiven that a compromise is made, the banks are somewhat easier on home owners who take this alternative. Individuals who do short sale their home may even be in a position to purchase a new house immediately. It is more common, however, that they should wait for 2 years before purchasing once more but then people who have fallen on enough hardship to lose their homes in the first place are not likely to be in a hurry to purchase again anyway.
If you do find yourself in a position where you are just unable to keep your home, and for which ever reason, it'd appear as though a short sale is the best option if the lender will settle for it. Whereas foreclosure leaves the person harder hit but still with a chance to start again at some point in the future. If you do find yourself in such a tight situation, then make it a point to talk to your lender to seek the best possible answer to your problem.
