If you in financial hardship and can't afford to keep your home, it is important to know the difference between a pre-foreclosure sale vs a short sale before you list your home.
If you are having financial trouble and can't afford to keep your home, it is important to educate yourself about the foreclosure process. You may not know the difference between a pre-foreclosure sale vs. short sale. Both options typically offer buyers an opportunity to get a home priced below the market rate. However, there are distinct differences between the two types of sale.
Before selling, it is important to understand the difference between a pre-foreclosure vs. a short sale. If you are in pre-foreclosure, you are typically at least 90 days behind on the mortgage payment, depending on which your state of residence. Generally, your home will already be scheduled for auction or that will be your lender's next step. Again, depending on your state, you will probably receive a Notice of Default and then a Notice of Sale.
A short sale is a type of pre-foreclosure sale in which your lender has agreed to accept a payoff that is less than you owe on the mortgage. Your lender will agree to this only if the value of your home has dropped and you cannot sell your home for what you owe on it.
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There are some key advantages to pre-foreclosure sales. Both types of sale stop the foreclosure process and are less damaging to your credit than a foreclosure. Either type of sale allows you to exit your mortgage.
The drawback to either type of sale is that you may not find a buyer in time to meet the lender's requirements. With a short sale, your lender will also report the money it writes off to the IRS as taxable income for you. Talk to a lawyer or certifed public accountant about the possible reprecussions of a short sale and the Mortgage Forgiveness Debt Relief Act which may waive the tax on that income.
Research your home value and talk to your lender to determine which type of pre-foreclosure sale fits your situation. A real estate agent can help you with either sale. To find your home value or a local real estate agent, go to Reply!