Difference Between Short Sales and Foreclosure

We often hear words like short sales and foreclosure whenever we want to invest in real estate, but a lot of people are not aware of these terms. If you really want to be successful in real estate investing, you need to know the terms that are commonly used in the industry. The first thing that you need to do is to familiarize yourself with the terms that will help you understand the industry. Investing in something wherein the terms are unfamiliar for you is similar to exploring an unknown place without any knowledge about it.

When we say short sales, it simply refers to a process wherein a person would sell a property for a price that is lower than the mortgage. This is normally done before a house gets foreclosed, and the seller would simply want to minimize the damages that foreclosure can do with their credit rating. Although there are problems that are associated with short sales, it is still lesser compared to the problems that you will experience if you are going to allow your property to be foreclosed.

Foreclosure occurs whenever the owner of the property no longer has the ability to pay the mortgage, and has used all the allotted time to do something about it. This is where some people are heading when they invest in real estate because they are not financially prepared for it. Some investors are getting their properties foreclosed because the agent that they hired didn’t help them get the best deal for them. Whatever the reason is, a foreclosure is still a foreclosure and this could have a negative impact on your credit rating.

Both short sales and foreclosure should be avoided at all cost but if you don’t have a choice, it would be better for you to get into a short sale, because there are a lot of advantages that you can get from it. Aside from the fact that you will have enough time to look for a buyer, you can also use the time that was given to you to raise the funds that you need to pay your mortgage. These are some of the reasons why there are people who are saying that short sales are better than foreclosure.

However, there are still a lot of things that you need to understand, and your situation could make foreclosure better than short sales. This is the reason why it is still advisable for you to look for a real estate agent or a realtor who can give you an in-depth explanation on these terms. He will also help you determine which option would be best for you, and the things that you can expect from it.

 

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