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Pre-foreclosure sale vs foreclosure: which is better for you?

If you can't afford your mortgage, consider whether a pre-foreclosure sale vs. a foreclosure is better for your situation.

Pre-foreclosure sale vs foreclosureDiscovering that you can't afford your monthly mortgage payments may leave you feeling confused and even a little scared. Before you let your home go into foreclosure, consider selling the house. Compare a pre-foreclosure sale vs. foreclosure to see which one is better for you. In most cases,  a pre-foreclosure sale is a better option than a foreclosure.

Every time that you pay your mortgage late, your credit score drops. Once your home reaches foreclosure, you might see your credit score drop by 200 points. Low credit scores make it difficult to buy another home, rent a home and get loans. Plus, even after your lender forecloses on your house, you may still be responsible for the balance on your mortgage. 

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When comparing a pre-foreclosure sale vs. foreclosure, you'll want to look at what a pre-foreclosure sale entails. These two types of sale let you sell your home before it goes through foreclosure. One pre-foreclosure sale is a traditional sale for what your home is worth. But if you owe more on your home that its market value, then you need to get approval from your lender for a short sale. Your lender may agree to stop foreclosure proceedings and give you time to sell the house. It's important that you talk to your lender, because the lender has the right to foreclose on the home if the sale doesn't close in time. 

The biggest issue that arises in a pre-foreclosure is that it can take more than 100 days to close on the property. During this time, you aren't making payments, and your lender might decide that it would rather sell the house at auction than wait for a potential buyer. When your home goes on the auction block, it might sell for significantly less than it's worth. Depending on your lender, you might have access to a short sale program, which lets you sell your home before the foreclosure. If your lender agrees to a short sale, it must also approve any offers you get on the house. Lenders typically won't accept offers much lower than the market value of your home. If offers from prospective buyers are very low, that may influence your decision of whether a preforeclosure sale or foreclosure is your best option. You may have to opt for forelcosure.

Both a foreclosure and short sale will impact your credit. However, a pre-foreclosure sale for the amount you owe on your home loan may not be an option. If you need to find a real estate agent who specializes in pre-foreclosure sales, go to Reply! for professionals near you.

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