Short sale how long before foreclosure

Depending on the state where you live and the process the lender uses judicial or nonjudicial , the foreclosure might happen fairly quickly, taking just a few weeks or months, or it might take several months or years. Not only might you get some extra time to live in the home if you simply let the foreclosure happen, but you could possibly also avoid being held liable for a deficiency judgment. Often, state law prevents a bank from getting a deficiency judgment after a foreclosure, but not a short sale.

If the bank can't get a deficiency judgment against you after a foreclosure—but it can after a short sale—you might be better off going through a foreclosure rather than completing a short sale that leaves you on the hook for a deficiency.

For specific advice about what to do in your particular situation, talk to a local foreclosure lawyer. Short sales can potentially take a significant amount of time to negotiate. A short sale buyer must be willing to wait to find out if the lender will accept the offer. Moreover, lenders often rejects the first offer, especially if the offer is lower than the short sale listing price.

Having to negotiate multiple counteroffers can draw out the process. The seller's real estate agent, rather than the lender, might have set the listing price. So, even if the buyer offers the asking price, the lender could come back with a higher—perhaps much higher—counteroffer. Real estate agents sometimes intentionally set a low listing price to attract offers. When this happens, the lender isn't likely to accept the first offer.

Instead, it will most likely come back with a notably higher counteroffer. Moreover, a house that has a below-market asking price often attracts multiple offers from different buyers, which can lead to a bidding war between potential buyers. Short sale properties are usually sold as is, which means that the seller and lender won't make any repairs to the home, even if an inspection indicates major problems. Bob Musinski has written about a variety of financial-related topics — including personal and business loans, credit cards and personal credit — for publications such as U.

News and World Report. He has worked as an editor and reporter for multiple publications and an international wire service. You can follow him on twitter bobmusing. Select Region.

United States. United Kingdom. Bob Musinski, Mike Cetera. Contributor, Editor. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations. What Is a Short Sale? Follow these two steps if you think you might need to do a short sale.

Be prepared to provide a strong reason why you should be considered for a short sale. The lender could request a property appraisal to confirm the value before deciding whether to approve your request. You will need to determine how to deal with the difference between the value of your home and the mortgage loan, known as a deficiency. Consulting with experts. A real estate lawyer and a real estate agent familiar with short sales can help ensure the process goes smoothly.

Short Sale vs. Debt Management. Actively scan device characteristics for identification. Use precise geolocation data.

Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights.

Measure content performance. Develop and improve products. List of Partners vendors. Your Money. Personal Finance. Your Practice. Popular Courses. Alternative Investments Real Estate Investing. Part Of. Getting Ready to Sell. Selling Strategies. Real Estate Agents. The Owner-Seller Option. The Selling Process. Tax Consequences. But rather than endure a costly and possibly lengthy litigation process, a bank will often cut its losses with homeowners who are unable to pay their mortgages due to a proven hardship, such as a divorce or loss of income.

And the reduced amount of money owed will ease the burden on the homeowners and not irreparably damage their credit. A foreclosure on a home adversely affects the homeowner in a number of ways, and it also has a negative effect on the lender and the housing market in general.

The homeowner receives a mark on his or her credit that can make it difficult -- sometimes impossible -- to borrow money for another home, car or major purchase.

This can essentially remove the former homeowner from the pool of large-purchase consumers, a key part of the nation's economic engine, for years. Banks nearly always lose money on foreclosures; between the lower sale price they receive at auction and the resources they must assign to administer the foreclosure process, it's rare for them to come out ahead at the end of a foreclosure [source: Experian ]. The housing market also suffers from foreclosure, due to decreased home values.

A report by the Federal Reserve Bank of Cleveland estimated that a foreclosed home not only dropped in value, but caused homes within a foot radius to lose up to 1 percent of their value, as well [source: Hartley ]. Foreclosed homes are less likely to be maintained and more likely to remain on the market for an excessive period of time, and they make it difficult for homeowners with good credit to upgrade into more expensive homes.

Congress Joint Economic Committee. Add in the additional costs that can accumulate throughout the sometimes lengthy foreclosure process, which could be just the tip of a burdensome financial iceberg. And if the homeowner is unable to afford payments, the foreclosure could eventually lead to a financial situation where bankruptcy -- with its significant credit implications for the borrower and costs for the lenders -- is the only option [source: Christie ].

Mortgage lenders won't always file for a deficiency judgment in a foreclosure case. It depends on the situation and the likelihood that they can win back the amount owed on the property. However, if all sides agree on a short sale , a new buyer in a better financial state could absorb some of what the original homeowner owes the lender. This would ease the original homeowner's hardship and put him in a more manageable position [source: Foust ].

Likewise, a short sale can drastically reduce the amount a bank may be looking to recoup from the homeowner. As we mentioned, a lender is also negatively affected by a foreclosure. After the cost -- and time expense -- of sending multiple notices and warnings to a delinquent homeowner, the lender faces additional costs as the foreclosure moves into the courts. Legal filings, hearings and the associated documentation all take time and money to prepare.

After the foreclosure sale, the lender may sue to recover money that's owed above the amount that a home was sold for in a foreclosure, adding to legal costs. Also, since the lender gains ownership of the property, the lender faces the expenses and dilemmas every homeowner faces when selling a property: If it takes time to sell, it can become a very expensive burden.

Even if the sale doesn't stretch on, the lender must still hire a real estate broker to administer the sale of the house [source: Foreclosure. However, in opting for a short sale , the lender can recover a portion of the money that's owed on the property, thus reducing the loss without the extensive legal process of a foreclosure. In many cases, a short sale reduces the lender's total loss to a level where it's more financially savvy for him to write it off, rather than sue the former homeowner [source: Foreclosure.

Many homeowners have spent years building up equity in their homes, only to watch it vanish as a result of the housing crisis. The housing market has been saturated with underpriced homes due to foreclosures, and finding buyers for many of these properties can be very difficult.

The wave of foreclosures has been damaging to the economy on a number of levels.