Boise Homes | Short Sale vs Foreclosure | Boise Real Estate Agency ...

There are a number of things to consider when purchasing a home. Usually homeowners have to take out a large mortgage and are required to make monthly payments back to the lender. If the homeowner cannot pay those payments, then the home can literally be seized and taken away from the homeowner.

Back in 2007 the real estate market suffered a substantial market crash. This caused many homeowners to default on their regular mortgage payments. This, in turn, caused a lot of foreclosures in the market.

So why were so many people defaulting on their payments? Why were mortgage payments not being reached? A main reason was that the borrowers of real estate had slim chances of repaying the established mortgage amount with out refinancing the home with a lower interest rate.

Also, before the real estate crash it was an up real estate market. If a homeowner had trouble paying the mortgage they couldn?t just sell the home. Buyers were not buying homes for the same price that the homeowner?s bought the home for. Because there was no profit in the sale, the homeowner?s couldn?t pay back the mortgage amount.

Home prices decreased drastically, and the interest rates increased so much that homeowners could hardly afford payments. This created even more victims to foreclosures. The homeowner would be kicked out of the home because they couldn?t make their payment, and then the institution that lent the money would turn around and auction the home themselves, still at a much lower rate, and complete the transaction. To stop the amount of foreclosures, the government stepped in.

This is where short sales come in to play. A short sale is when someone sells a home at a price that is much lower than what the homeowner originally bought the home for. The original homeowner?s pending mortgage payment was much higher than what the selling price was going for, but the lenders accepted the initial price to avoid expensive foreclosures and long repayment options.

Short sales are most often considered the better option for a homeowner. While there are still negative outcomes of short sales, the negative aspects are generally considered a much better option than a foreclosure.

For example, with a short sale if a homeowner wants to get a new mortgage loan they usually have to wait two years before they have good enough credit to qualify for a loan. With foreclosures it is usually around five years. There is also a difference with short sales getting a $1,500 relocation expenses allowance and an exemption from taxes on any forgiven amount from the real estate sale.

Todd McCauley is an owner/agent of Eagle Rock Properties, a Boise real estate brokerage. He manages a program called The HELP Program that designed to help struggling buyers qualify for a mortgage. He helps buyers and sellers with Boise homes.

Source: http://thehelpprogram.com/411-short-sales-option-foreclosure

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