Okay, I am doing this from a loan officer's point of view and of what I have seen how it is reported to credit reports.
When someone has a short sale (sells it for less than the balance owed, that the lender accepted) it reports to the credit report as a 120 day late AUTOMATICALLY and it will say account settled for less than balance owed.
When a foreclosure is reported, it says either foreclosure, 120 days late, 150 days late or ALL of the above.
There is no difference in "saving someone's credit" when it comes to either doing a foreclosure or a short sale. Either way it's the same thing.
When a home is included in a Chapter 7 bankruptcy, it shows up as a derogatory remark (120 days automatically) and it says account included in bankruptcy.
SO, it does not matter how it is done, the lender STILL does not like short sales, foreclosures OR houses included in a Chapter 7 bankruptcy. They do like them included in a Chapter 13 (payment arrangements) and/or selling it on their own. I have seen this several times and lenders still don't like short sales, they are still viewed as a foreclosure. I am sure short sales are advantages to prevent judgments for the rest of the balance. But to me, a foreclosure is a foreclosure. If someone wants to go into foreclosure, they are better off to file Chapter 7 to PREVENT the judgment against them and for it to not come back to haunt them!
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