Short Sale Vs Foreclosure

Short Sale vs Foreclosure, which is better? I read an article that basically said in order to determine, which is better a Short Sale or a Foreclosure you had to look at your specific circumstances. Wrong, here is a simple rule of Thumb, NOTHING is financially worse than a foreclosure.

When you cannot make the payments to your house you have two options. You can either do nothing and let your lender kick you out of your house, or you can negotiate with them and attempt to sell it for less.

What is a Foreclosure?

When a bank kicks the debtor out of their house they attempt to sell it in order to make up the loss that they took. If they cannot make up the loss they may come after the debtor in order to recoup their losses.

So, if you let the bank take your house as a foreclosure, not only would you end up without a house, but you may still owe money on it.

In addition to this your credit would go down the drain. A foreclose may lead to a 200-400 point drop in your FICO score. Even if you had perfect credit before it is going to hurt. It could also take 5-7 years before you would be able to buy another house again.

What is a Short Sale?

A Short Sale happens when you are unable to make your payments and negotiate with your lender in order to sell your house at a lower price. In this case you simply try to find a buyer at a price that the bank will accept.

If you can you may be able to get out of your house with no other obligations and little or no affect on your Credit score.

FICO scores have been known to be lowered by 50-200 points from a Short sale, which is a lot easier to recover from then a Foreclosure.

Depending on your situation you may also be able to get another loan within 0-3 years of a short sale.

Conclusion

When it comes to Short Sale Vs Foreclosure, Short sales are the better option.

The main difference between a short sale and foreclosure is that in a short sale you work with the bank in order to make the best out of the situation. To learn more about short sales visit this Short Sale Definition.

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