The Trusted Home Buyer Logo602-456-4440

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

a person smiling for the camera

Martin Boonzaayer

April 16, 2020

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 Phoenix house. 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. 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 a little short of 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. The third step is the foreclosure auction. This is when the bank is trying to get the most money for the property in a short amount of time. The fourth step is an REO, which stands for “Real Estate Owned”. If the property does not sell at auction, the bank then repossesses the property and places it on the market for sale. 

Based on the process outlined above, “foreclosure” is the bank taking title or “possession” of your Phoenix house. This would impact your credit score and would 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. 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, 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 immediately.

Is A Short Sale Really The Answer?

During the foreclosure process as described above, you have the opportunity to list your Phoenix 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, and 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 balance of your loan or get really close to it. This might be a difficult process because you will have to be in constant communication with the lender about the offers you receive and will have to wait for them to approve or counter offer the offers you receive. If you do have an offer that the bank is willing to accept, selling your Phoenix 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.

Explore more

March 21, 2023
How to Avoid Buyers Remorse When Buying a Home in Arizona

Buying a home is a major decision, and it’s not uncommon to experience buyer’s remorse after making such a big investment. It’s easy to get caught up in the excitement of purchasing a new home, but it’s essential to take the time to carefully consider your options before signing on the dotted line. This article […]

Read More
March 8, 2023
Selling Your House With Termite Damage

Selling your house can be a stressful experience, and discovering termite damage only adds to that stress. Termites are a common problem for homeowners, and if left untreated, they can cause significant damage to your property. However, selling a house with termite damage is not impossible. In this blog post, we will discuss what you […]

Read More
January 25, 2023
9 Reasons Why Working in the Real Estate Industry Is So Beneficial

Real estate has been, for so long, providing a primary means of survival to humans. Being a primary sector, the demand for workers is constant. As a result, the real estate industry keeps growing, and many people want a piece of it. For instance, you can easily land real estate jobs on reputable aggregators like […]

Read More
January 25, 2023
How Does the Foreclosure Process Work?

Unfortunately, foreclosures are a regular occurrence, and many Arizona homeowners face the possible foreclosure of their homes. This article will walk you through the foreclosure process and offer some options or steps you can take to avoid foreclosure. What Is Foreclosure? Foreclosure is the legal process of a lender who attempts to recover the amount […]

Read More
The Trusted Home Buyer Logo
Copyright © The Trusted Home Buyer
WE BUY HOUSES IN:

4.7 63 reviews