A website like Josh McLean Homes offers short sales and foreclosures, but, if you’re considering one of these as the last resort, which one should you consider? Both types of sales can affect your credit, as we have discussed, but a short sale is considered less of a negative remark on your credit report than a foreclosure. But how do you know if you quality for a short sale? A list of qualifications is listed on the home buying blog at About.com, but here is a condensed version to see if you could qualify:

• The market value of the home is lower. If the home has been on the market and the value of the home is less than the unpaid balance, the property could be sold as a short sale. The danger lies in the pre-payment penalty a current home owner will have to pay.
• The mortgage is on or near default status.
• The seller or home owner has fallen into financial difficulty. This requires a letter of hardship, and not all conditions of financial difficulty qualify. According to About.com, this can be unemployment, divorce, medical emergency, bankruptcy, and death. Moving to a smaller residence or pregnancy does not qualify. This type of hardship letter, in addition, needs to be about not being able to make monthly payments and why you can’t pay the difference between the market value and what remains in mortgage payments.
• The seller has no assets. Assets can be used to make mortgage payments in some degree, but if you have no assets, you might qualify for a short sale. Assets, however, consist of savings accounts, real estate, stocks, and IRAs or other retirement accounts.

If you fall into one of these categories, your property may qualify for a short sale. If you’re wondering about the consequences, consult the link at About.com or previous posts about short sales on this blog.

Have you ever wondered what goes into foreclosure? Or why certain people sell their homes as a short sale and what REO means? As many properties sold on the market are foreclosures, knowing the steps of foreclosure are important if you’re considering purchasing a foreclosed or short sale property.

One term is pre-foreclosure. Most homes sold as a short sale are pre-foreclosure homes, as the owner is willing to settle for selling the property at a lesser value than what the home is worth to avoid foreclosure. A pre-foreclosure, out of the three options, can forestall damage to an owner’s credit, which results with a foreclosure, and before a lender gets involved, consultation on the lesser price of the home can be done with attorneys, accountants, and real estate agents.

Foreclosure is more of a common term used and pertains to any steps leading to an auction on a property. For those interested in auctions for a foreclosed home, often county clerk offices have listings – some of which can be found on email lists and notifications – of when foreclosed homes are going up for auction and the dates for viewing them. Although the procedure varies with states, foreclosure comes in two types, judicial and non-judicial. Judicial foreclosures involve mortgages instead of deeds of trusts and the process for a home to go up for auction takes longer. A non-judicial foreclosure, however, involves a trustee, or third party, who handles the process of foreclosure two to four months after the owner has defaulted on the home’s payments. A home will reach the auction block much quicker with a non-judicial foreclosure.

The third type of foreclosed home is a post-foreclosure. A post-foreclosure can simply be the new owner assuming the property or, if not sold at the auction, can be a property still in control of the lender, or an REO. An REO, although the property is still held by the lender, indicates that the property is the result of a poor lending decision that lead to overhead and losses. However, once the property is an REO, the lender must continue to maintain it and not leave it “as is.”