Foreclosure versus Short Sale - Is there A Difference to the Seller?

Real Estate Agent with Berkshire Hathaway HomeServices - C. Dan Joyner 21498



What are the differences between foreclosure and short sale?

First of all, a homeowner who loses a home to foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years. However,a homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae-backed mortgage after only 2 years. That is a big difference for most people.

Another difference is on any future 1003 application (loan application), a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 that asks "Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?" this will affect future rates. There is no similar declaration or question regarding a short sale.

With other mortgages, such as FHA, if current before executing a short sale, a homeowner may apply for an FHA loan immediately. If homeowner is late before short sale execution, they will be eligible for a FHA loan after 3 years.

As for credit scores, with a foreclosure, the score may be lowered anywhere from 250 to over 300 points and will typically be affected for over 3 years; plus will remain as a public record on a person's credit history for 10 years or more. With a short sale, only late payments on the mortgage will show, and after the short sale, the mortgage is normally reported as ‘paid as agreed', ‘paid as negotiated', or ‘settled'. This can lower the score as little as 50 points if all other payments are being made plus a short sale's effect can be as brief as 12 to 18 months. There is no specific reporting item for ‘short sale' to the credit bureau.

And finally In a foreclosure the home will have to go through an REO process if it does not sell at the auction. In most cases this will result in a lower sales price and longer time to sale in a declining market. This will result in a higher possible deficiency judgment. However, in a properly managed short sale the home is sold at a price that should be close to market value and in almost all cases will be better than an REO sale resulting in a lower deficiency. In fact, in some successful short sales it is possible to convince the lender to give up the right to pursue a deficiency judgment against the homeowner altogether.

So is there a difference? You bet there is... don't walk away from you mortgage. Call or email us to today to discuss how we can help you with a short sale on your home!
Posted by

If you are looking to buy or sell a home in the  Anderson or Greenville SC real estate areas, visit our website at for tons of great information.


Sheila Newton   
Sheila Newton Team 
Berkshire Hathaway HomeServices -
C. Dan Joyner, Realtors
864-225-1205 (direct)
864-940-6377 (mobile)    

                  Follow Me on Pinterest

Our Team




Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Dan Edward Phillips 06/27/2011 07:18 AM
  2. Charles Stallions 10/07/2011 04:30 PM
Home Selling
South Carolina
South Carolina Real Estate
Foreclosure Help and Prevention
Posts to Localism
POSITIVE ATTITUDE for the Weary Soul
foreclosure prevention
short sales
how to avoid foreclosure
short sale specialist

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Kristin Hamilton CA Realtor
Sun Lakes Realty - Banning, CA
(909) 557-6966- Specialize 55+ Communties Banning

This simplified it for me as well. I get buyers asking me this all the time and I usually have to verify with one of my lenders. Thanks for the great article.

Jun 17, 2011 02:01 PM #1
Kwee Huset
Kwee Huset Realty - Venice, FL
Venice Florida Homes For Sale

Thanks for sharing the great information. I enjoyed your post and have a nice weekend. 

Jun 17, 2011 03:18 PM #2
Sheila Newton Team Anderson & Greenville SC
Berkshire Hathaway HomeServices - C. Dan Joyner - Anderson, SC
Selling the Upstate since 1989

Kristen - Glad you enjoyed it.. thanks for stopping by

Kwee - you too... :)

Jun 17, 2011 04:27 PM #3
Dan Edward Phillips
Dan Edward Phillips - Eureka, CA
Realtor and Broker/Owner

Good Morning Shelia, excellent input for home owners in trouble.  It is easy to understand and will make the selection process easier for them.  In a time of stress, that is critical!

Jun 17, 2011 09:00 PM #4
Mona Gersky
MoonDancer Realty, Dillsboro,NC - Sylva, NC
GRI,IMSD-Taking the mystery out of real estate.

Hi Sheila, I need a folder system for everything I've bookmarked from you! I always know I'm going to learn something important. Thanks.

Jun 18, 2011 12:28 AM #5
Charles Stallions
Charles Stallions Real Estate Services - Pensacola, FL
800-309-3414 - Pensacola, Pace or Gulf Breeze, Fl.

Sheila I think you nailed it for all of in simple terms and easy to understand. Thanks

Oct 05, 2011 02:45 PM #6
J. Philip Faranda
J. Philip Faranda (J. Philip R.E. LLC) Westchester County NY - Briarcliff Manor, NY

Excellent analysis. I disagree with those who say that a short sale only benefits the agent. 

Oct 07, 2011 04:33 PM #7
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?


Sheila Newton Team Anderson & Greenville SC

Selling the Upstate since 1989
What can we help you with?
Spam prevention

Additional Information