Does a short sale avoid foreclosure?
A short sale is an alternative to foreclosure. A short sale prevents you from having to go through foreclosure and eviction. A short sale does make a smudge on your credit report but is much less traumatic to your credit than a foreclosure.
Which foreclosure procedure is usually available only when the value of the property is less than the debt?
To avoid the time and expense of foreclosure and the possible holding costs of REO properties, banks will often agree to a short sale of the underwater property, where the property value is less than the remaining debt secured by that property.
Which is the most likely consequence of a short sale?
There are a variety of consequences for the owner of a short-sale property.
- Mortgage Cancellation. A mortgage payment that is too high for a homeowner is the most common reason for listing a property at a short sale.
- Deficiencies.
- Credit Standing.
- Second Liens.
- Tax Consequences.
What is the major disadvantage to lenders of accepting a deed in lieu of foreclosure?
The primary disadvantage to the borrower is the loss of the property, the income from the property, and the borrower’s investment in the property. The conveyance of the property is also taxable.
What’s the difference between short sale and deed in lieu of foreclosure?
In either a short sale or a deed in lieu of foreclosure, there is a difference between the amount the borrower owes and the amount the lender actually receives in the transaction. In a short sale, it’s the difference between the mortgage balance and the sale price.
Can a deed in lieu of foreclosure affect your credit?
While it’s a commonly-held belief that short sales and deeds in lieu of foreclosure have less of a negative impact on credit scores than foreclosure, in reality, the effect is basically the same. Another possible consequence of a deed in lieu of foreclosure or short sale is a deficiency judgment.
How does a short sale work in real estate?
A short sale occurs when a homeowner sells his or her home to a third party for less than the total debt remaining on the mortgage loan. With a short sale, the lender agrees to accept the proceeds from the sale in exchange for releasing the lien on the property. (Learn more about short sales to avoid foreclosure.)
Can a short sale help you avoid foreclosure?
If you’re having difficulty affording your home during hard economic times, you may be able to avoid foreclosure through either a short sale or a deed in lieu of foreclosure. While neither option is as desirable as staying in your home, they do at least help you avoid the costs and hassles associated with foreclosure.