Which Is Better? A Foreclosure or Short Sale of Your Columbia House?


We all have rough times every now and again. As a property owner, having a rough time may mean losing the biggest investment of your life: your house in Columbia, Shelbyville, or Manchester. If you are unable to make your mortgage and insurance payments, you are about to be facing foreclosure with your lender if you miss a certain amount of payments; this all depends on your mortgage document.

Foreclosures Happen To The Best Of Us

In most cases, the foreclosure process will not begin until you have missed between 3-6 payments. First of all, it is important to understand that foreclosure is a process. The first step is called pre-foreclosure. This means that the property is in default and the bank may or may not foreclose on the property. As a homeowner, you can stop foreclosure Nashville!

The second step is a short sale. This is where the owner is trying to sell the property before the bank forecloses, but the market value is less (short) than their balance due on the loan. Depending on the bank, they may or may not accept offers less than the balance due at this point. If the owner can get the bank to short sell, it is much better for their credit versus going through foreclosure.

The third step is the foreclosure auction. This is when the bank proceeds with a public auction either online or on the courthouse steps and sell the property quickly to recoup their money. If the property does not sell at auction, the bank then repossesses the property and places it on the market for sale at a later date or sells it to another bank. This is called REO, which stands for “Real Estate Owned”. 

Based on the process outlined above, “foreclosure” is the bank taking title or “possession” of your house. This will heavily impact your credit score and will also show up in any reports that future landlords would run. The foreclosure stays on your credit for at least 7 years before falling off, sometimes 10 years.

Depending on your situation, you may have more time to live in your home if you let it go to foreclosure because of the statutory redemption period. This time frame depends on whether you took title via mortgage or deed of trust. In Tennessee title is with a deed of trust.

If you have a mortgage, then the process may take as quick as 30 days, or as long as 2 years. At the end of the redemption period, if you have not reinstated your loan and are still not able to make your payments, additional interests, and late penalties, then you really have to move out.

If you took title through a deed of trust, there is typically no statutory redemption period, and you have to move out when the bank forces you to leave. If you refuse to leave, the sheriff’s department will remove you.

Is A Short Sale Really The Answer?

During the foreclosure process as described above, you have the opportunity to list your Columbia or Murfreesboro TN house as a short sale. The best time for a short sale is the time period when you realize you are unable to make your payments as outlined in your loan agreement. You will need to do this before the lender files legal action against you and officially owns your house.

You will be able to list your house on the market and try to get an offer that will satisfy the bank. If the buyer’s offer is less than what the seller owes, the sale will have to be approved by the lender. This might be a lengthy and difficult process because banks are slow in responding particularly if they are about to lose money on a house.

You will have to be in constant communication with the lender about the offers you receive. Waiting is hard and so be ready to wait for the bank to approve or counter offer the offers you receive. Banks don’t get in a hurry with short sales because they are most likely losing money. Short sales can go on for months.

If you do have an offer that the bank is willing to accept, selling your Shelbyville or Murfreesboro house to that buyer would relieve you of some of the credit damage of having a foreclosure, although it would still negatively affect your credit. 

The best option would be to avoid the foreclosure process altogether and negotiate a sale of your property before you get to the point of missing payments on your loan.

Sell Your House Quickly

Another option is to sell the house as soon as you know you cannot make the back payments. Selling the house quickly is to your advantage because it reduces the number of back payments, interest, and penalties that have to be paid. To read about some solutions to stop a foreclosure, please see our article “How to Stop Foreclosure of Your House in Nashville.

Putting the house on the market with a realtor will be time-consuming. You will have to prep the house and be ready for buyers to visit day and night. The process alone will be a minimum of 30 to 60 days, and foreclosure may stop the listing if no contract is in hand. Even with a contract in hand, communication between the listing agent and foreclosure attorneys has to run smoothly in order to stop the foreclosure. The process can still be quite difficult and the seller may have to seek legal counsel.

Foreclosure or Short Sale, Why? Instead, Sell to a Local Real Estate Investor

Perhaps the best option when a homeowner is behind in payments or has received the dreaded “notice of foreclosure” is to sell the house to a real estate investor. This solves so many problems. With a local direct buyer or investor, they can pay off your late payments with interests and penalties and give you cash as part of the sale. Even if the property has been served with foreclosure and the foreclosure attorneys are involved, a good local investor can STOP FORECLOSURE in Nashville!

Every situation is different. The investor will analyze the value of the house, the number of repairs that are needed, the amount of loan balance, the payoff of all back payments and interest and penalties to calculate what they can offer you.

We at Southern Homes Investments have stopped foreclosure several times. We understand the processes and want to help you overcome this situation of foreclosure or short sale.

Contact Southern Homes Investments today at 615-500-4466 to see what options we could offer you so you wouldn’t have to decide which would be better, a foreclosure or short sale of your Columbia house. We help people in these situations in McMinnville, Shelbyville, Tullahoma, and other places in Middle Tennessee. Give us a call, we would like to talk to you as We Buy Houses Columbia TN and throughout Middle Tennessee.

Disclaimer: David Wright is a real estate agent in Tennessee, and this article is not a solicitation to list your house.

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