If you are facing the reality of a potential foreclosure on your home in Highland Park, St. Paul, MN, you’re probably considering the option of a short sale. It can be a very confusing process, and one that you shouldn’t attempt without experienced professionals helping you through it – both legal help and real estate help.
But is a short sale better for your credit in the long run than a foreclosure? There has been some confusing information put out in the past few months, but the bottom line is still the same: yes. A foreclosure is always the worst option if you have other options available to you. According to the Distressed Property Institute:
Each borrower’s credit situation is different, and the way that a creditor reports a short sale to bureaus is different. The reality is that hundreds of thousands of distressed homeowners who have chosen a short sale have experienced a lesser impact on their credit than those who have chosen foreclosure.
In a short sale, a distressed homeowner may be able to obtain another mortgage sooner than someone who has a foreclosure on his or her record. Also, more and more employers pull credit before hiring a potential employee, and a foreclosure can keep you from getting a job. Some employers pull credit reports on existing employees, and a foreclosure may not bode well in certain industries.
These benefits stacked against the negatives of foreclosure, including the embarrassment of public announcement and literally being kicked out of your home, make, in my opinion, short sale the reigning champion.
This article contains some good tips for someone weighing the options of short sale vs. foreclosure:
Consider a short sale when foreclosure seems inevitable
It’s not a given that your lender will agree to a short sale on your property, and the sooner you can address the problem (or looming potential problem), the more likely they will be to consider it. As soon as you realize that you are not going to be able to make a house payment, and that you have no way to avoid falling further behind, start the process of talking to your lender about the possibility of a short sale.
Short sales have disadvantages too
While they’re better in the long run than foreclosures, your credit will suffer. But if you can keep other forms of credit (i.e. credit cards, car loans, etc.) paid and current, you will overcome the credit hit more quickly than with a foreclosure on your record. The amount that is “forgiven” by your lender was previously taxable, but is currently not taxable through January of 2012. So time is currently on your side, but also has an expiration date – take advantage of this window!
The one best tip I can give you: Don’t Do This Alone
You really do need an attorney who knows what they’re doing, and a real estate agent who has short sale experience on your side. It’s a much different process than navigating a traditional home sale, and the money that you pay in fees will be well worth it compared to the headache of trying to do it on your own.
The short answer is that any possible option is preferable to foreclosure. A short sale of your Highland Park, St. Paul, MN house may be a hard pill to swallow in the short run, but it’s a smart long-term financial move if a foreclosure is on the horizon.