Foreclosures and short sales can be complicated processes – whether you are on the buying or selling end. To help you navigate through your situation, it is recommended you work with a Wisconsin real estate agent experienced in foreclosures or short sales.
What is the difference between a foreclosure and a short sale?
A foreclosure is a legal process in which a mortgage lender sues to regain possession of a property after the homeowner defaults (stops paying) on the mortgage. The lawsuit does provide a redemption period in which the homeowner can payoff the mortgage. In Wisconsin, this period is generally 6 months.
If the homeowner is able to repay the mortgage by refinancing or selling the property during that time frame, the foreclosure suit is dismissed. If not, the property goes to aution or Sherriff’s Sale where is it bid upon in "as-is" condition, and usually sight-unseen. If the lender ends up being the highest bidder on the property it is now considered REO or Real Estate Owned and the lender puts it back up for sale. Such properties are often in bad condition. When buying an REO property, you will be able to view it and working with an agent who is familiar with the REO process is recommended. Here’s a good blog post about the 5 realities of buying a foreclosure property.
A Short Sale is quite different and certainly not a short process.
Short Sales are when a property is sold for less than is owed on the property. The contract between buyer and seller cannot go through unless the lender agrees to take a loss on the sale. This approval process can take a long time and involve extensive negotiation. A short sale may not affect credit scores as much as foreclosures.
Things to consider:
Non-traditional sales processes like these should be handled by an experienced agent. Find an SFR certified First Weber real estate agent.
REO properties are usually sold as-is and may require repairs
A foreclosure remains on the borrower’s cerdit report for 7 years and negatively affects the credit score.
Having trouble making your mortgage payment?
Contact your lender and see if there are any modifications that could be made to your loan such as negotiating a payment plan, refinancing or receiving a forbearance period if your situation is temporary.
Thinking about purchasing a Short Sale?
Inquire extensively about the home and it’s financial status – any obligation for unpaid taxes or bills and the cost of needed repairs.
Here is another blog post all about short sales and if they could be right for you.