Before the process can begin, the lender that holds the mortgage must sign off on the decision to execute a short sale. Additionally, the lender, typically a bank, needs documentation that explains why a short sale makes sense; after all, the lending institution could lose a lot of money in the process.
If approved for short sale, the buyer negotiates with the homeowner first and then seeks approval on the purchase from the bank second. It is important to note that no short sale may occur without lender approval.
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 homeowner who has gone through a short sale may, with certain restrictions, be eligible to purchase another home immediately.
Unlike a short sale, foreclosures are initiated by lenders only. The lender moves against delinquent borrowers to force the sale of a home, hoping to make good on its initial investment of the mortgage. Also, unlike most short sales, many foreclosures take place when the homeowner has abandoned the home. If the occupants have not yet left the home, they are evicted by the lender in the foreclosure process.
Once the lender has access to the home, it orders its own appraisal and proceeds with trying to sell the home. Foreclosures do not normally take as long to complete as a short sale, because the lender is concerned with liquidating the asset quickly. Foreclosed homes may also be auctioned off at a “trustee sale,” where buyers bid on homes in a public process.
In most circumstances, homeowners who experience foreclosure need to wait a minimum of five years to purchase another home. The foreclosure is kept on a person’s credit report for seven years.
Read more: What’s the difference between short sales and foreclosures? | Investopedia https://www.investopedia.com/ask/answers/100314/whats-difference-between-short-sales-and-foreclosures.asp#ixzz5EpnJ8AzJ
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