In this economy, the real estate world has taken a major hit.
Foreclosures and short sales have become a major phrase in this country.
Both systems are similar, but also have different repercussions.
All in all both process can be very hard on an American family.
Foreclosure at a Glance Foreclosure is a situation in which property is repossessed back to the mortgage lender.
The foreclosure process involves the United States Judicial System.
The foreclosure process occurs when the current property owner is not making their mortgage payments.
Sometimes banks will try to work with property owners on a payment plan to avoid the owner from going into foreclosure.
The start of the process occurs when the mortgage lender files a lawsuit versus the owner of the property.
The property owners will need some sort of legal representation in this situation.
The foreclosure process varies in time, but the average foreclosure process can take between 6 and 18 months.
Foreclosure Penalties Not only does the property owner lose their property or home, but they also will face several tough long term dangers.
A large decrease in credit score in always the first thing to come up.
Poor credit scores result in higher interest rates on credit cards, personal loans, car loans, and various security deposits.
The property owner is also at risk of being sued for more money than the property is worth because the mortgage lender will want restitution for legal fees and time during the process.
Short Sales at a Glance Short sales happen when the property owner decides to sell their property for much lower money than what they owe on the property.
The process generally starts when the property owner falls behind on payments and decides to sell the property instead of going through the foreclosure process.
Both the lender and the property owner must determine how much to sell the property for to reduce the overall mortgage debt.
In most cases the Lender will release the borrower from their mortgage payment obligations, but in some cases they may not.
Short Sale Penalties obviously the owner will lose their property, and the owner might still have to continue to pay the remaining balance of the mortgage after the sale.
The owner also may be able to work out a deal with the lender to come up with a final payment and not have to pay a remaining balance.
The owner's credit report could drop a few points, but not as bad compared to the foreclosure process.