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What’s the Difference Between a Short Sale and a Foreclosure?

What’s the Difference Between a Short Sale and a Foreclosure?

Answers for St. Louis Homeowners
Most folks these days have at least heard of these two terms, but knowing exactly what they mean is a different story. If you’re a struggling homeowner, though, it’s particularly important for you to understand these terms as you prepare to make a decision about your upside-down mortgage or your late mortgage payments.

St Louis Short Sale

A short sale is a viable option when a homeowner is both behind on their mortgage payments, and upside-down on their mortgage; meaning you owe more on the home than its current market value. If you meet both of these criteria, then a short sale might be a good option for you.
Essentially, you’ll list your home on the market for a fair market value, and the bank agrees to take a reasonable offer amount, knowing it will be less than what you still owe on the loan. Keep in mind that banks are not obligated to approve a short sale, and you must be able to prove that you’re experiencing a true financial hardship.
Finally, one of the most common misunderstandings of short sales is homeowners and buyers thinking that the process is quick. ‘Short’ refers to the fact that you’ll be selling your home for less than what you owe; in other words, you’ll be ‘short’ at the closing table. The process can actually take several months, but the more you cooperate and the more experienced short sale agent that you choose, the shorter it will be.

St Louis Foreclosure

A foreclosure is the process by which a bank can actually seize your home. Banks have had to do this far too often in the last few years, and aren’t eager to take any more. It’s a last-ditch effort on their part and only occurs if a homeowner hasn’t sought out the many available options to avoiding a foreclosure; including a short sale.
If you’re behind on your mortgage payments by a significant amount, or haven’t made a payment at all in quite some time, then a foreclosure may be in your future. Once the bank seizes your property, you’ll lose all rights and ownership of it. The bank will sell it at auction to get as much as they can for it, and you will be completely left out of the process. In addition, a foreclosure looks far worse on your credit than a short sale.
If you’re struggling to make your mortgage payments, or are upside-down on your mortgage, your best bet is to call a local realtor who is experienced in short sales, stopping the foreclosure process, and knows your area well. They’ll be able to explain all of your options so that you can avoid foreclosure at all costs. The worst thing you can do is ignore the situation because the bank will eventually seize your home and that’s not a mark you want on your record.

Ryan Wessels (69 Posts)

Ryan Wessels is a real estate investor that has been investing for over 7 years now. He is president of STL Real Estate Properties, a company that actively buys and sells houses in the St Louis Missouri area. Ryan got his start in real estate doing short sales, and the STL Real Estate team still to this day helps people sell their property short.


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