Short Sale vs. Foreclosure

Sometimes real estate terms can be all but easy to understand and when you are in the home buying process you may end up falling in love with a home that is in foreclosure or that is a short sale. You also may be about to face a foreclosure or a short sale. So lets clear up any confusions there may be on what these two terms actually mean.

Short Sale (the technical definition) a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property, and the property owner cannot afford to repay the liens’ full amounts and where the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency.image[1]

In layman’s terms- the owner of the property owes more than the property is actually worth but is in a personal financial hardship and must sell the property. The owner (or their real estate agent) negotiates with the holders of the mortgage (the lien holders) to accept less than the outstanding balance as satisfaction of the loan, if they are able to sell the home at a fair price. The lien holders review the amount of loss they are willing to accept on the debt and they can either accept or deny the offer depending on a variety of factors – which is why short sales can actually take a long time to be approved and close.

Foreclosure (the technical definition) A procedure by which the holder of a mortgagean interest in land providing security for the performance of a duty or the payment of a debtsells the property upon the failure of the debtor to pay the mortgage debt and, thereby, terminates his or her rights in the property.

In layman’s terms- A foreclosure will happen when an owner of a property has not made their mortgage payments and the lender exercises their right to take back the property. When the owner signs the loan documents to use the mortgage this is one of the terms they agree to, if they don’t pay, they don’t stay. There is a legal process the lender must go through to take the property back which includes selling the property at a public auction at the county courthouse. The sale is being made so that the mortgage on the property can be paid off by the money made from the sale. Keep in mind foreclosure proceedings do vary from state to state. In the state of Colorado the process takes 110-125 days from the date the lender files the notice of foreclosure until the date the property actually sells at the county courthouse auction. This period of 4 months allows the homeowner time to seek options to save the home and resolve the financial hardshi

If you are facing foreclosure and want to know your options keep in mind that many homeowners decide to do a short sale rather than just walking away from the property and allowing it to go into foreclosure because short sales have a lesser impact on one’s credit score and allow the homeowner to purchase a home in 1-2 years instead of 2-5 years after the foreclosure. A short sale also provides the homeowner the opportunity to relieve them of paying any difference between the price the property sold at and the outstanding balance. There are also special government programs to help homeowners. Each situation is unique to the individual. If you are facing a foreclosure please call us for a confidential consultation to find out what options are available to you, 303-912-3320.

If you are considering purchasing a short sale or foreclosure know that you can get some great deals, but you will need to be a patient and flexible buyer. For a short sale (when the homeowners still control the property) it could take months for the contract to be approved by the lien holder. If you are purchasing a foreclosed property (after the county public auction when the bank owns the property) it could be a great deal but is sold in “AS IS” condition and the bank will not make any repairs for the buyers.

At the end of the day if you happen to find a home that is in foreclosure or is a short sale, don’t worry it is not as scary as you think, we can help you get a great deal on the home you love. If you are going through a foreclosure or are getting close, The Monica Perez Real Estate Team can help. We specialize in helping people avoid foreclosures and short sales every day.

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Angel Garcia Rivera Testimonio

Ángel García Rivera estaba a punto de perder una de sus casas. A continuación se muestra su testimonio sobre su experiencia con Monica Perez y su equipo de bienes raices. Estabamos felices de haber podido ayudar a Ángel a vender su casa.


Monica Perez Real Estate Services
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