Foreclosure vs Short Sale2019-08-16T03:10:51+00:00


Credit Report A foreclosure will show up as a public record on your credit report, the same as a bankruptcy will show. The impact of a foreclosure can be anywhere from 200 to over 300 points. The foreclosure typically will affect score for a minimum of 3 years and will report for 7 to 10 years. Only late payments on mortgage will show on your credit report. Once the short sale is completed, it will be reported as settled for less than full amount due (or similar verbiage). Depending on the number of other trade lines you have, balances on credit card accounts and if everything else is kept current, the impact can be as little as 50 points. A short sales effect can be as brief as 12 to 18 months.
Future Loan The question will be asked: “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?” The may affect future rates after the 5-7 year waiting period. No questions to answer.
Deficiency Rights Some states, such as California, give the lender the right to pursue the homeowner for a deficiency after the foreclosure has taken place. In most cases, the lender agrees in writing to release the homeowner from any future deficiency right after the close of the escrow.
Amount of Deficiency Judgement The final sales price is lower than a short sale and the fees involved for the bank are higher. If the lender does have deficiency rights they can result in higher amount that the lender can pursue. The sales price in a short sale is typically at market value or just below. In most cases, the amount of the write off is smaller than in a foreclosure, which would result in a smaller amount that the lender could pursue if they do not waive the deficiency judgement.


A Short Sale Makes Better Sense — Financially and Emotionally

The “F” word, Foreclosure, stir up all kinds of personal embarrassment and lasting financial stigma including:

  • Lasting black marks on your financial records — you may not be able to borrow a minimum of 7 years
  • Background checks by prospective employers will reveal your past
  • Your privacy is damaged when legal notices appear in your hometown paper
  • Your ability to get insurance is affected — coverage automatically costs more

A Short Sale Brings Immediate Peace of Mind

  • No permanent financial damage — you can get a new mortgage in as little as 18 months
  • You can rebuild your credit and pay down your debts starting immediately
  • Financial freedom is a reality