In Q3 2022, there were more than 92,000 foreclosure filings, including notices, scheduled auctions, and bank repossessions. The number is up 3% from Q2 2022 and 104% from Q3 2021. 

While homeowners believe that foreclosure is inevitable when they fail to make their mortgage payments, this is far from the truth. Homeowners have another option, and that is to make a short sale. What is a short sale vs. a foreclosure?

To learn more about the difference between short sale vs. foreclosure and the buying process for each, continue reading. 

What Is a Short Sale?

A short sale is when you sell your property for less than what you still owe on the mortgage.

For instance, if you still owe $250,000 on the mortgage, you could sell the home quickly for $200,000. However, you would still be responsible for paying the remainder of the mortgage, in this case, $50,000, and any cost associated with the sale. 

Most importantly, you cannot begin the short sale process without getting approval from your mortgage lender. The lender must sign off on the sale before it can proceed. 

Lenders often lose money on a short sale, so you will be required to provide documentation stating why a short sale is necessary. You will need to prove that your financial troubles were recent. Common examples include:

• Divorce
• Health problems
• Job loss

If you list any financial struggles you disclosed to the lender when you first applied for the mortgage, the lender will deny your short sale. Additionally, if you mention any pre-existing financial struggles you didn’t previously disclose to the lender, the lender will see you as dishonest and likely not approve the sale. 

Once the lender approves the short sale and the property sells, the lender will collect the proceeds. The lender may forgive the remaining mortgage balance, but since the homeowner is still responsible for paying it, the lender may try to collect the funds through a deficiency judgment. 

What Is a Foreclosure?

A foreclosure is when the mortgage holder takes legal action against you after you fail to make your monthly mortgage payments. The lender takes ownership of the property, then sells it to recover the mortgage amount. 

Pre-foreclosure can begin a few months after you fail to make several months of payments. The number of payments you need to miss varies from lender to lender and between mortgage terms.

Each state governs foreclosure proceedings, so lenders must abide by these rules. This includes how lenders notify homeowners and provide alternative solutions, like refinancing options, to bring the loan up to date and avoid foreclosure. 

What’s the Difference Between a Foreclosure and a Short Sale?

Both short sales and foreclosures help you get out of paying your mortgage. But, the most significant difference between a short sale and a foreclosure is choice. A homeowner can choose to make a short sale. The process is voluntary. 

Conversely, foreclosures are involuntary. The lender takes legal action to control and sell the property regardless of what the homeowner says or does. 

Another difference is that homeowners engage in the short sale process, while only the lenders participate in the foreclosure process. When the homeowner decides to make a short sale, they will sell the home through a realtor. However, foreclosed properties sell in a public auction at the courthouse.

Short Sale vs. Foreclosure: Impact on Credit Report

While short sales and foreclosures both negatively impact your credit report, short sales don’t do as much damage.

The average credit score drop for a short sale is 50-150 points. The effect may only last for 12 to 18 months. Yet, for a foreclosure, the drop is 200-400 points.

Typically a foreclosure stays on your credit report for seven to ten years. For the first five years, you cannot buy a new home. After five years, you may be able to purchase a new home, but it will come with restrictions. After seven years, you can buy a new home without restrictions.

You will also be required to report foreclosure on all future loan applications.

However, a short sale may never show up on your credit report. The creditor has the option to report the debt reduction to credit agencies. Many don’t report it. You can purchase a new home immediately after a short sale with some conditions. You may need to report the short sale on future loan applications, but it’s not always necessary. 

Short Sale Buying Process

Buyers looking to buy a short-sale property will have better investment opportunities than buying foreclosed properties.

But, interested buyers should look for a pre-approved short sale. This is when the lender approves the property’s sale price before it goes on the open market. It signals that the lender and homeowner are ready to sell the property. 

If you negotiate the sale with the lender, they can reject any offer. Lenders, especially banks, are well known for having slow response times because there is a lot to consider regarding a short sale transaction. 

The lender wants to recover as much of the principal mortgage loan as possible. Thus, they often won’t accept an offer below the current market value or lower than the amount still owed on the mortgage. However, if the lender does accept an offer, it will still take time to process. 

This is why scouting for a preapproved short sale is best. 

You can find short-sale properties on a multiple listing service (MLS). Set your search options to short-sale listings, and filter out short sales that are subject to lender approval or require a third-party review. A third-party review means the lender has yet to approve the short sale. 

You can also network with real estate investors, agents, and wholesalers to find short-sale listings.

Further, the local courthouse will have a record of properties in pre-foreclosure. The owners of these homes haven’t paid their mortgage for several months, and the lender has filed a notice of default. If the homeowner doesn’t negotiate a solution with the lender or pay the balance, the property can be considered a short sale.  

Pros of a Short Sale

Short-sale homes are often in better condition than foreclosures, which is why they provide better investment opportunities. Homeowners who decide to short-sell usually try to lessen the damage to their credit score by maintaining the property. 

Sometimes, short sales will sell for below market value, offering buyers an excellent opportunity to find a deal. This is especially so with preapproved short-sale properties. Plus, there is often less competition for short-sale properties because many don’t want to negotiate with the lender due to its inconvenience. 

Cons of a Short Sale

Since short-sale properties are sold as-is, buyers assume some risk. For example, the homeowner could change their mind and pay their past-due balance to keep the home. The money you spent during the home buying process for inspections would be lost. 

On the other hand, the house could require a lot of maintenance or be in poor condition because the homeowner didn’t have the funds to keep it up. 

Furthermore, short sales take longer to close because there are multiple lienholders. The process also requires more paperwork and due diligence than traditional home-buying.   

Foreclosure Buying Process

Like the short sale buying process, lenders want to recoup as much of the mortgage balance owed during a foreclosure sale. Banks don’t want to be landlords, so they try to sell the property as fast as possible for as much as possible. 

Unlike short sales, with a foreclosed property, you usually don’t get to tour the home or order an inspection before purchasing it. Since the property will be sold as-is, you need to pay close attention to the listing to understand the property’s condition better. 

Additionally, many foreclosures require a cash payment. Therefore, if you want to take out a mortgage for the purchase, you need to look for other home-buying options. 

To find foreclosure opportunities, you can consult the following:

• Bank offices
• Foreclosure websites
• Local newspapers
• MLS
• Real estate agents and online searches

Foreclosure Pros

More often than not, foreclosed properties sell for below current market value, and the sale happens quickly. This is because lenders are eager to get rid of the property, and closing a cash offer is faster than a short sale or standard home purchase. 

Foreclosures also come with a clean title. After a foreclosure, the bank will remove all liens and encumbrances from the previous owner. 

Foreclosure Cons

The federal government states that 42% of households have mortgages, and the average mortgage debt is just over $200,000. Thus, providing a cash offer is challenging for many who want to purchase a foreclosed home.

Further, those with cash on hand often end up with a property needing significant improvements. Homeowners with financial woes tend to neglect maintenance or abandon the property altogether. Even if you get a property at a significantly lower price, you may need to spend a lot of money on renovations. 

Need to Sell Your House?

For those behind on their mortgage payments, carefully weighing the pros and cons of a short sale vs. foreclosure can help you decide the best way to recover the most funds for your property while saving your credit score. Many buyers are interested in purchasing your home, especially for a below-market price. 

If you’re interested in selling your house, let iBuyer.com help. Get your home valuation now and quickly sell your home for cash. 

The post Short Sale vs. Foreclosure: What You Need to Know appeared first on iBuyer Blog.

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Over six million homes are sold across America every single year. A successful home sale runs smoothly and can help you make a nice profit on your property!

However, the condition of your home and property market aren’t the only things that can affect your home sale. The real estate agent that you hire to sell your home can also have a huge impact on the success of your sale. So, with more than 1.5 million realtors working in America at the moment, how do you choose a good one? 

Well, knowing how to spot bad real estate agents can help you a lot. This will make it easy to spot red flags and avoid dodgy realtors. So what are the signs of a bad real estate agent?

Read on to find out 10 warning signs of a bad real estate agent and what to do if you hire one.

1. Poor Communication 

Selling your home can take months, so you will have to deal with your realtor a lot. They need to provide clear, concise, professional communication.

You need a realtor who is going to keep you up-to-date on home viewings and their marketing plans. You also need to be able to get in touch with them when you have questions.

If you struggle to make an appointment with them or don’t hear back for ages this is a sign of poor communication. In that case, you should look elsewhere. 

Of course, you also don’t want to hire a realtor who is going to bombard you with calls and information. If you find that their level of communication is overwhelming then it’s also best to avoid them.

2. Bad Real Estate Agents Lack Confidence 

Your realtor is responsible for selling your home and getting a great price for it. So if they can’t even sell themselves then this is a bad sign. 

You don’t want a realtor who is too cocky or arrogant. However, you do want to find someone who feels secure in the knowledge they have and knows how to close a sale. 

When you meet them, look out for a realtor with presence who really engages with you. You can also test their knowledge by asking lots of questions. This will show whether or not they can keep their cool.

3. Lacks a Professional Network 

Any realtor with an established professional career will have a great network. They can use this to: 

• Negotiate your home selling price 
• Organize open house viewings 
• Offer referrals for home inspections 

A realtor who doesn’t have a strong network is either inexperienced or can’t maintain professional relationships. Neither of these is a good thing! 

4. Bad Listening Skills 

Great listening skills are a must-have for any realtor. After all, they can’t represent your needs if they don’t understand what these are!

Listening skills can also help your realtor bond with potential buyers and market your home to suit their interests. 

Because of this, you want to avoid a realtor who doesn’t listen or struggles to take information in. If you constantly find yourself answering the same questions or explaining the same things, it is time to look elsewhere.

5. Lacks Proper Experience 

When it comes to marketing a home successfully, experience is key. This means that your realtor will understand your home’s value. They can use this understanding to help you set a realistic asking price.

They’ll also understand how to market your home’s assets and will be confident when talking to potential buyers. This can all help you maximize your profits. 

An experienced realtor also has a detailed knowledge of real estate market trends. They can use this to market your property and find the perfect time to sell it.

During your real estate agent interview, make sure you ask the realtor about their professional experience. This can tell you a lot about what they are bringing to the table. 

6. Behaves Unprofessionally 

Your realtor acts as your representative when selling a home, especially if you can’t be at viewings. So you have to trust them. 

Because of this, you want a realtor who is going to behave professionally and keep your best interests at heart. This is why unprofessional behavior is such an important red flag to look out for.

Examples of unprofessional behavior from your real estate agent can include: 

• Them providing inaccurate or poorly-researched information 
• Disclosing personal details about potential buyers 
• Poaching clients from other realtors
• Bad-mouthing colleagues or competitors 
• Contacting you at anti-social hours
• Being over-familiar or making you uncomfortable in person or when they communicate with you 
• Being rude to you or potential buyers
• Showing up late to meetings and house viewings 

This behavior shows that your realtor isn’t committed to giving their job 100%. In fact, their energy may be elsewhere. 

This doesn’t just make them difficult to work with. It can also mean that they aren’t trying their hardest to get you a good deal on your home sale.

7. Is Too Pushy and Puts Pressure On You 

A realtor can provide valuable support and expertise, but they are not there to make decisions for you. In fact, it is worth remembering that they have an interest in making a sale on your home and their commission. 

A good realtor should provide insights and advice. However, they should never seem pushy or try to force you to make a decision. If you do notice them doing this then it is time to look elsewhere.

8. Doesn’t Know How to Negotiate 

Receiving a home offer can be an exciting time. However, you may find that potential buyers make an offer that is below your asking price. 

This is when your realtor can make a huge difference. They will come back to you with the offer and let you decide whether or not you want to accept it. 

A good realtor will recognize a good deal when they see one and can advise you on this. However, they cannot accept an offer on your behalf, even if they advise you to. 

Instead, you can ask them to negotiate on your behalf. How they handle negotiations can have a huge impact on the success of your sale. 

For example, if they aren’t confident or don’t communicate quickly, you could lose a potential buyer. So you want someone who knows what they’re doing and is on top of things.

Of course, you don’t want to wait until crunch time to find out if your realtor can negotiate. Ask about their negotiation strategy when you first meet with them. This will give you a good idea of how they will handle negotiations further down the line.

9. Has No Marketing Skills 

The key to getting a great offer on your home is good marketing. This helps the right buyers find your property. 

Because of this, you should check out a realtor’s marketing skills before you hire them. Take a look at the properties on their website and search for them online. The more visible they are, the better their marketing strategy.

Of course, you also want to see a marketing strategy in place. A consistent brand and content show great marketing skills. In comparison, marketing that is all over the place will make it harder for buyers to find your realtor and their services.

Digital Marketing Skills 

Digital marketing, in particular, is a must-have. After all, we spend hours every day on our phones and computers. So why not make the most of this captive audience? 

You can check out a realtor’s digital marketing skills easily by looking at their website or social media pages. The more they use these, the better their engagement will be.

Because of this, you should be wary of any realtor without an online presence or with an empty social media feed.

10. Shows Questionable Ethics 

Bad ethics go beyond the limit of unprofessional behavior and can make it very difficult for you to sell your home. In fact, you could even report a realtor for unethical behavior, such as: 

• Discriminating against you or potential buyers
• Charging referral and unearned fees 
• Practicing without a valid real estate license 
• Giving you unqualified legal advice while you are selling your home 
• Misrepresenting you, either by accident or intentionally
• Representing both you and your buyer (this is also known as “dual agency”) 

Some of this behavior isn’t just unethical; it is also illegal. Fortunately, you can report your realtor or make a complaint against them. To do this, reach out to the local Association of Realtors or the Department of Justice in your state.

What Can You Do If You Notice the Signs of a Bad Real Estate Agent?  

Ideally, you should look out for the signs of a bad realtor before you hire them. However, this doesn’t always happen. 

If you are concerned about your realtor’s behavior, it is important to address this as soon as possible. The last thing you want is to spend months dealing with a bad realtor. 

Start by raising your complaints with them and see how they respond. They may hold their hands up and clean up their act. This isn’t ideal, but it can save you a lot of admin.

If not, then you should get rid of your realtor as soon as possible.

Have You Signed the Listing Agreement? 

When a hire a real estate agent, you sign a written listing agreement. This gives them permission to market your property and represent you during your home sale.

This agreement includes your terms for hiring a realtor, such as: 

• The listing price you have agreed to 
• Their duties in representing you 
• Any duties you have to fulfill (such as making the property available for viewings) 
• The agent’s commission rate
• Terms for mediation 
• An automatic termination date if your property does not sell 

It can also include a clause for broker’s compensation. You owe this to the realtor if you fail to fulfill your duties. If you choose to dismiss them, then you may also owe them compensation. 

There are different types of listing agreements that you can sign. For example, you may have signed an exclusive agency listing agreement or open listing agreement. These let you market and sell your property without help from the realtor.

In comparison, an exclusive right-to-sell listing agreement makes this more difficult. Even if you do sell your property without their help, you will still have to pay their commission. 

If you have signed the listing agreement already, then you will need to discuss this with your realtor. Depending on the type of agreement you have, you may be able to sell your property without them releasing you from your listing. 

Will Your Realtor Release You From Your Listing Agreement? 

You can terminate your listing agreement according to the terms in the agreement itself. This might include cancelation fees. 

Some realtors may try to convince you to stay or make it difficult for you to leave. After all, they want to get their commission on your home sale. 

It is best to approach this calmly and with plenty of evidence. Explain why you want to terminate the agreement and list examples of their behavior. Put this in an email so you have a record of the exchange. 

While you may still have to pay the cancelation fees, most reasonable realtors will accept this, especially if you have evidence. This means you can be rid of them and start looking for other ways to sell your home.

Try Selling With an iBuyer 

If you are selling a home, hiring a realtor isn’t your only option. Using an iBuyer (or instant buyer) is a great way to save money and cut out the hassle of trying to find a realtor. 

To sell your home to an iBuyer you simply: 

• Upload your property details and photos onto a secure online portal 
• Wait to receive all-cash offers on your home 
• Arrange a home inspection for your potential buyer 
• Accept their offer and complete the sale 

This process is incredibly quick, and iBuyers offer great value for properties. So you don’t have to sell your home below market value. 

On top of this, you won’t have to pay an agent commission for the sale. This means that you can maximize your profits!

Keep the 10 Warning Signs of a Bad Real Estate Agent in Mind

As you can see, when it comes to spotting bad real estate agents, there are plenty of things to look out for.

Keeping these 10 warning signs of a bad real estate agent in mind will help you avoid choosing a bad realtor. So you won’t waste valuable time when selling your home! 

Of course, you don’t have to worry about this when selling with an iBuyer. In that case, head over to iBuyer now to get a cash offer on your home today!

The post How To Spot a Bad Real Estate Agent: 10 Warning Signs appeared first on iBuyer Blog.

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