The Differences Between a Short Sale and a Foreclosure
In the real estate world, there is often some confusion as to the difference between a short sale and a foreclosure. A short sale is when you sell your house for less money than the amount you owe on your mortgage. In a short sale, the bank must approve the purchase price and will typically require documentation to explain why you are selling “short” and may require that you are experiencing a financial hardship. Our office specializes in negotiating short sales with your bank and we will make our best efforts to get the balance (a/k/a “deficiency”) waived. However, this is not guaranteed and all depends on the seller’s (more specifically the borrower who agreed to repay the loan) financial circumstances.
In a foreclosure, the bank will typically sell the property (after they obtain their final judgment of foreclosure) and reserves the right to sue you for a deficiency judgment (the difference between the total amount owed to the bank and the market value of the home). For example, the bank could sue Mr. Homeowner for $100,000.00, if the total amount owed to the bank is $200,000.00 (which includes court costs, attorneys fees, etc.) and the determined “market value” of the home (not what it is sold for) is $100,000.00.
As you can see, the differences between a short sale and a foreclosure are vast. Don’t ever walk away or ignore a foreclosure lawsuit that has been brought against you. There are alternatives to foreclosure and a short sale is only one of them. You can avoid a foreclosure judgment by completing a short sale. If we are able to get your short sale approved and the deficiency waived, the foreclosure case gets dismissed and they would not be entitled to a judgment as they have settled to satisfy your debt for an amount less than they are owed.
It is important to note that there may be tax consequences when considering not just a short sale, but any other alternative to foreclosure (or even foreclosure itself). Therefore, you should consult with a certified public accountant to determine whether or not you will incur tax consequences.
Hiring a well-qualified attorney to handle your foreclosure defense and short sale is crucial. Do not attempt to embark on this journey without legal counsel. Visit our short sales page or foreclosures page for more information and do not hesitate to contact the Law Offices of Anthony W. Surber, P.A. if you have any questions!