How does a foreclosure versus a Short Sale affect my credit?

Foreclosures show up on your credit report as "FORECLOSURE", and can stay on your record for seven years. This may make it difficult for you to obtain a new loan in the future.  It must also be disclosed on job applications which can sometimes make or break a decision to employ you. A Short Sale is listed as "SETTLED DEBT", and is much less harmful to your credit. Please consult a credit company for more information.

In a Short Sale, it is possible the bank could report the difference in what you sell your property for and what was owed. This means the IRS could consider the difference as income, and you could be taxed on that income. The bank might also ask you to pay a portion of the difference back in the form of an unsecured note, which is similar to an I.O.U. However when we negotiate with the bank, we employ tactics to have the bank consider the debt settled and that no further monies are owed.


In a foreclosure, your house is sold at an auction. This typically causes the difference of the total amount you owe and the foreclosure sale price to be much greater. This means you have a higher potential tax liability. Additionally, the bank may come after you for a Deficiency Judgment.

 

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Real Estate Agent: Arina Hanciulescu (ELITE REALTY)
Arina Hanciulescu
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