What is a Short Sale?

In real estate terms, a sale is labeled a ‘short sale’ when the profits of a sale are less than the debt owed and secured by the liens against the property. The property owner is not able to repay the full amount in this circumstance, and the lien holders agree to release their lien and accept less than the original amount of debt owed.

How a Short Sale Affects You

A short sale is a better option than a foreclosure. A foreclosure has massive effects on your credit history and personal life while a short sale is not as damaging. A short sale will only briefly effect your credit score (12-18 months) while a foreclosure can affect you for up to 3 years. Additionally, a foreclosure can be listed on your credit history for over 10 years while a short sale cannot be listed on your credit history at all. For more about the differences between a short sale and a foreclose, check out our guide.

What is a Foreclosure?

The foreclosure process involves taking possession of a mortgaged property as a result of the mortgagor’s failure to keep up mortgage payments. Being the mortgagor who goes through a foreclosure is bad for several aspects of your life. A foreclosure can affect your credit score, credit history, your ability to buy a house in the future and even your employment.

Tax Foreclosure

This is a special type of foreclosure in which the sale of a property is forced by an IRS agent or real estate agency due to the nonpayment of taxes. This is distinct from a standard foreclosure, in which the lender seizes and resells a property due to the buyer’s nonpayment of the mortgage payments.

Redemption

There is a time period during a foreclosure which is referred to as the redemption period. During this time, the homeowners going into foreclosure are given the opportunity to buy back their property. There are two ways to redeem the property:

• paying off the total debt, including the principal balance, plus certain additional costs and interest, before the sale in order to stop the foreclosure, or

• paying off the purchase price, plus certain costs and interest, after the foreclosure sale to reclaim the property

Borrowers are able to redeem their home in order to avoid a foreclosure. This means the borrow is given the opportunity to pay off the entire underlying mortgage debt plus interest and other costs despite the fact that they have defaulted on their mortgage payments. Being able to redeem a property before a foreclosure is rare.

What is Bankruptcy?

Bankruptcy is a legal process involving a person or business that is unable to repay outstanding debts. The bankruptcy can be declared by the debtor or on behalf of the creditors. Once bankruptcy is petitioned, all of the assets of the debtor are measured and evaluated and used to repay part of the debt. A successful bankruptcy occurs when the debtor is relieved of the debt obligations incurred prior to filing.

How Does Bankruptcy Affect Real Estate?

When an individual or business is faced with a financial crisis, there are faced with two choices: foreclosure or bankruptcy. Believe it or not, bankruptcy is usually a better option.

A foreclosure is a forfeiture of a home to the mortgage lender through defaulting which satisfies the past due balance. Foreclosure should be avoided at all cost due the damaging affects they have on your credit score. Bankruptcy, however, gives the person or business a chance to start over. This can allow for a discharge of debts by forming a repayment plan of the debts.

.

Loss Mitigation

This process involves a third party helping a homeowner. The third party can include a bank or firm that handles the process of negotiation between a homeowner and the homeowner’s lender. Loss mitigation is the process of negotiating the terms of a mortgage to prevent going into foreclosure. There are several ways loss mitigation can take place.

Loan modification: This is a process whereby the homeowner’s mortgage is modified and both lender and homeowner are bound by the new terms.

Short sale: This is a process in which a lender accepts a payoff that is less than the principal balance of a homeowner’s mortgage which then allows the homeowner to sell the home for the actual market value.

Short refinance: This process involves a lender reducing the principal balance of a homeowner’s mortgage in order to allow the homeowner to refinance with a new lender.

Deed in lieu: A Deed in Lieu of foreclosure (DIL) is a disposition option in which a mortgagor voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage.

Cash-for-keys negotiation: The lender will pay the homeowner or tenant to vacate the home in a timely fashion without destroying the property after foreclosure.

.

Partial Interests

Ownership of some portion of the ownership rights to real estate, such as mineral rights.

C.O. – Certificate of Occupancy

An inspection is performed prior to the issuance of a Certificate of Occupancy to insure that the new or renovated structure meets all necessary fire protection requirements and that all improvements have been completed in accordance with the approved plans.

HUD – United States Department of Housing and Urban Development

Settlement Statement is a standard form in use in the United States of America which is used to itemize services and fees charged to the borrower by the lender or broker when applying for a loan for the purpose of purchasing or refinancing real estate.

REO

REO stands for Real Estate Owned. If a property is REO, this means that the bank owns the property as the result of a foreclosure. Read on to learn more about REO properties.

BPO

Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of a specific business process to a third-party service provider.