Short Sale Vs Foreclosure...Benefits to the Seller

Real Estate Agent with Donovan & Associates Realty

I get this question a lot from sellers when on listing appointments.  What is the benefit of a short sale vs foreclosure?  I'll attempt to answer the question here.

1.  The seller (who obviously is in a stressful situation) can take comfort in knowing that they tried to "do the right thing" for the lender.  They did not just walk away.

2.  Most of the short sale homes I tour are in relatively good shape compared to foreclosed homes.  Why is this?  See number 1.  The seller is trying to do the right thing.  Why is this important?  Homes in good shape attract higher priced offers.  This has a stabilizing effect on the market.  Think about the last appraisal you needed to come in and the appraiser used the beat up foreclosure down the block as a comp.  Oh, by the way, it sold for 50 to 100,000 dollars less than your deal.

3.  In a foreclosure, you're not eligible for a Fannie Mae backed loan for five years.  With a short sale, you are eligible for a Fannie Mae backed mortgage after two years and in some cases less than that. 

4.  After foreclosure you will have to disclose yes to the question, "Have you had property foreclosed on or given title or deed in lieu thereof in the last seven years" on future loan applications.  This can impact the interest rate you are charged.  With a short sale there are no similar questions.

5.  A foreclosure will have a much more negative impact on your credit score than a short sale.

6.  A foreclosure can remain on your credit report for 10 or more years.  A short sale can be reported a number of ways, but typically, it is reported as paid in full.

7.  A foreclosure can cause you to lose a security clearance in jobs where this is required.  A short sale does not typically have an impact on security clearances.

These are just a few of the benefits of a short sale vs foreclosure.  If you live in the Fredericksburg, Virginia area and are having problems making your mortgage payments. please contact me at (540) 672-8290 or  Doing a short sale may be your solution.  


Comments (2)

Paul Francis
Francis Group Real Estate - Las Vegas, NV
Las Vegas Real Estate Agent - Summerlin Homes

Excellent post Robert. I especially like #1 and I think more emphasis needs to be placed on this with all of the current programs in place. On May 14th, proposals to help out short sale sellers / lenders were announced to be included in all of the Help for Homeowers programs which Still have not been finalized to this day...

I'm eagerly awaiting for some incentives for homeowners who "Try to do the right thing"...

And Yes... My Short Sales are more often then not... far superior in quality then the bank owned home around the corner.

Oct 28, 2009 11:32 AM
Robert Donovan


Thanks for the comment.  We shoud all be striving (including the governement) to help people who want to do the right thing.


Oct 28, 2009 11:46 PM