Although the economy has been on the rebound in recent years, times are still tough for many New Yorkers. In many cases, when a person has experienced a job loss, a divorce, unexpected medical expenses or another financial hit, that individual has no choice but to stop paying his or her mortgage. Failing to pay a mortgage can result in a short sale or a foreclosure.

Both short sales and foreclosures are possibilities when a person fails to make mortgage payments, but the processes are different. A foreclosure occurs when a person doesn’t make mortgage payments and the lender initiates legal action in order to take the home back from the current home owner. In New York, foreclosure properties are sold at a public auction. The process for foreclosing takes about 15 months from beginning to end in New York.

A short sale occurs when a homeowner attempts to sell his or her property but doesn’t get an offer high enough to cover the unpaid mortgage. In a short sale, the bank agrees to accept less than what is owed on the mortgage rather than face the possibility of the homeowner defaulting. In some situations, a bank may not agree to do a short sale, which can depend on the owner’s financial situation and the amount of the offer and the unpaid mortgage.

The tax, financial, and legal ramifications of a short sale and a foreclosure are different. In addition, short sales and foreclosures have different effects on a person’s credit score. If you are in New York and are considering a short sale or a foreclosure, you should seek out legal advice before making any decisions. Call the New York Real Estate Attorneys at Friedman & Ranzenhofer at 585-484-7432.