Selling a foreclosed property could be one of the ways to avoid home foreclosure. But how can selling a property that is due to be foreclosed benefit the homeowner?

Advantages of Selling a Home Due for Foreclosure
Is a short sale a better option than foreclosure. (Photo Credits)

Real Estate website Zillow says selling a home, even if it means short-selling it, putting up a soon-to-be foreclosed home on sale is better that seeing it auctioned off and getting fully evicted from the property.

“Your credit score can drop 200 to 400 points in a foreclosure. It hits credit harder than a short sale because you have to accrue late mortgage payments on your way to foreclosure. It can take up to seven years to get a new home loan after a foreclosure, but it can be significantly shorter if your hardship situation was beyond your control — such as the job loss example. You just need to connect with lenders to determine which one will lend to you sooner.”

Read more here.

Better on the credit rating

You may have sold your home short but short sales, according to Investopedia has a more positive impact on the property owner’s credit rating versus a foreclosure. The downside however, as mentioned in their article is that it takes a lot of leg work.

“Short sales tend to be lengthy and paperwork-intensive transactions, sometimes taking up to a full year to process. However, short sales are not as detrimental to a homeowner’s credit rating as a foreclosure is. A short sale looks better to future lenders and creditors: It shows you took action before the bank had to repossess your home. A homeowner who has gone through a short sale may even, with certain restrictions, be eligible to purchase another home immediately.”

Take a look at the rest of the write-up here.

Disadvantages of a short sale

Personal finance website Pocket Sense meanwhile shared the pros and cons of going through a home short sale instead of a foreclosure. Like the two above mentioned write-ups, they mentioned that a short sale can be beneficial in terms of credit rating.

“After short selling a home, the borrower may still owe his lender a deficiency. Some states such as California have anti-deficiency laws to prohibit lenders from seeking a deficiency judgment following a short sale. However, if the borrower’s state allows deficiency judgments, a lender can seek repayment of the amount owed after a short sale. Another disadvantage of short selling is damage to the borrower’s credit score, although the damage is easier to recover from than it would be in a foreclosure. A borrower must also vacate as soon as a short sale closes and so must line up a place in which to move.”

The continuation of the original post can be found here.

The decision on whether to finally foreclose a property or get into a home sale is ultimately the decision of the property owner. After all, he knows the full extent of his finances.

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