Short Sale vs Foreclosure What to do....

Real Estate Broker/Owner with Caron's Gateway Real Estate NH #054318


Short Sale Results

Foreclosure Results

Your Future Fannie Mae Loans

You will be eligible for a Fannie Mae backed mortgage after only two years following the successful completion of a short sale.

If you lose your home due to a foreclosure, you will not be eligible for a Fannie Mae backed mortgage for at least five years.

Your Future Loans For Any Mortgage Lender

You will not be asked to declare or be questioned regarding a short sale on any standard loan application (1003).

You will be asked on any future standard loan application (1003) if you have had a property foreclosed in the last seven years, therefore affecting your rate.

Your Credit Score

Following a successful short sale your mortgage will be reported on your credit score as either paid or negotiated, lowering your score as little as 50 points and affecting you for only 12 to 18 months.

Your credit score can lower as much as 300 and usually at a minimum of 250 points and affects your score for over three years.

Your Credit History

A short sale is usually reported as paid in full and is not reported on your credit history.

A foreclosure will remain on your credit history for 10 years or more and will remain as public record.

Your Current Employment

Your short sale does not appear on a credit report and will not challenge your current employment status.

These days, many employers routinely run credit checks on employees in certain positions. If you have a foreclosure on your credit report, some employers consider it a reason for termination or reassignment.

Your Future Employment

Again, since a short sale will not be included on your credit report, it will not have an effect on your future employment opportunities.

If you are applying for a position where your credit report is taken into consideration, a foreclosure is extremely harmful to your chances of being selected for a new job.

Your Deficiency Judgment

If your short sale is handled successfully, the lender may give up the right to pursue a deficiency judgment against you. If the lender does pursue a deficiency judgment against you, the amount will be considerably lower because your home was sold at a price closer to market value than that of an REO (Real Estate-Owned) sale.

In all foreclosures, with the exception of those states without deficiency, the bank has the right to file a deficiency judgment against you. Since your foreclosed home will have to go through the REO process if not sold at auction for a lower sales price, this results in a higher deficiency judgment against you.

Comments (5)

Dan Hopper
Dan Hopper - Gold Way RE - Westminster, CO
Denver Broker / Author / Advocate/Short Sale

Good posting, Diane ...  we are finding with FNMA backed loans, that a foreclosure will impact the buyer from obtiaining another FNMA loan up to 7 yrs, and some lenders are stating with NO exceptions.  FHA will still work a 3 yr turn around.  Short sales are still the way to go!!

Jun 28, 2011 04:33 AM
Christine Farkas
Keller Williams Western Realty - Bellingham, WA
Awesome Customer Service Experience

awesome read diane! there has been a long standing debate on which way to go. short sale & foreclosure has both its pro's and con's. but, there are greater majority leaning towards short sales.

Jun 28, 2011 04:46 AM
Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

This is great info. Thanks for taking the time to write it. I have bookmarked for future use.

Jun 28, 2011 04:53 AM
Bill Somerset
Re/Max Realty Group - Dover, NH
ABR, e-PRO - Realtor - NH Real Estate Agent

Great information Diane.  Thank you for posting.  It's always easy for me to explain the advantages of short sale vs. foreclosure, but you have something you can show them!

Jun 28, 2011 07:27 AM
Diane Daley
Caron's Gateway Real Estate - Northumberland, NH

Feel free to use it with those who need a visual explaination Bill. Thanks for reading and posting everyone.

Jun 29, 2011 02:33 AM