Señor Short Sale Says....Troubled Owners Beware! 
Some owners who are financially struggling are considering a short sale to limit their financial damage. While this may seem like a good way to avoid a foreclosure fallout, it may not be the best idea. Especially since the damage to their credit score is the same regardless if you do a short sale or foreclose on the home. As in all things it's always good to consider all of your options before you make a big decision. There at least 3 things homeowners should know when considering a short sale:
•1. Your Credit Score Will Drop Just The Same
Even though some owner's think a short sale won't affect their credit score as negatively as a foreclosure, they would be mistaken. The truth is a short sale can have as equal effect on their credit score as a foreclosure. Unfortunately if an owner is defaulting on their mortgage payments, no matter what the reason e.g.: divorce, death of a spouse etc., that default of mortgage is greatly foreboding of future risk. Because a short sale and a deed-in-lieu, that lets the borrower walk away for his home and transfer the property deed to the lender, have an equal effect due to the fact that they are both viewed as severe delinquencies. Therefore the damage that will be done to your credit score depends on what condition it was in previous to the foreclosure or short sale. For example if your credit score was in good condition before the short sale, say in the 700's, your score could dip 200 points. However your credit score should repair itself after a year or two. Depending on how quickly it goes back to its previous score will be determined by how you maintain you credit during this time period. The hit you take on your credit score will be less if you already had a low score due to late payments or other negative items on your credit.
•2. The Lender May Come After You For The Difference
What state your property is in will dictate if you have more legal protection from your lender if you choose a foreclosure over a short sale. California. Minnesota and Alaska are states that ban deficiency judgments in a foreclosure. That is due to the fact that a deficiency judgment allows lenders to sue borrowers as long as the home that was lost in foreclosure was sold for less than what the borrower owed. Hence this is why when a short sale does happen the bank usually tries to get the owner to sign a note promising to payback the difference. The difference between what they owe and what the homes final sale price was. Therefore it is up to the owner/owner's attorney to remove the clause and get the lender accede to not go after any further payment from the owner.
•3. You'll Have Less Time To Recover Financially
A foreclosure in most states will require at least several months to complete. During which time an owner doesn't make mortgage payments and can make a cash nest that will possibly let the move forward after they leave the home. Although some states have a nonjudicial process which means the lender doesn't have to take you to court and the foreclosure process is much quicker. A foreclosure allows the owner to have a redemption period which can last as long as twelve months. This redemption period can really help an owner and give the owner a chance to move forward a little more gently. Unfortunately owners don't have that option with a short sale.
As in all things it's always a good idea to make sure you take a good look around and examine all the angels so that you are aware all of your options. Please let me know it I can be of any assistance. These are trying times and we all can use help to get through them. I hope this helps.
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