There are several differences between a short sale and a foreclosure. The chart below helps highlight some of the most significant differences between the two options. It is highly recommended to speak with your lender, attorney and/or accountant to determine which option best fits your personal situation.
Successful Short Sale
|Obtaining a Future Fannie Mae Loan||A homeowner who loses their home to foreclosure is ineligible for another Fannie Mae Loan for a period of 5 years+.||A homeowner who successfully negotiates and closes a short sale will be eligible for another Fannie Mae Loan after only 2 years+.|
|Obtaining a Future FHA Insured Loan||A homeowner who loses their home to foreclosure may be eligible for another FHA Insured Loan after only 3 years+.||A homeowner who successfully negotiates and closes a short sale without any missed payment may be eligible for another FHA Insured Loan immediately.|
|Obtaining a Future Fannie Mae Loan as an Investor||An investor who loses a property to foreclosure is ineligible for another Fannie Mae Loan for a period of 7 years+.||An investor who successfully negotiated and closes a short sale may be eligible for another Fannie Mae Loan after only 2 years+.|
|Credit Score||Score may be lowered anywhere from 250 to over 300 points for a period of 3 years or longer.||Score is only affected by the late payments and the credit score may be impacted by as little as a 50 point reduction. The overall effect can be as brief as 12 to 18 months recovery time.|
|Credit History||A foreclosure will remain public record permanently and on a person’s credit report for 10 years or longer.||The debt shows as “settled” on most credit reports and in some cases “paid in full.”|
|Security Clearance||A foreclosure will usually reflect negatively and pose an issue on security clearances, sometimes resulting in a revocation of an existing security clearance.||On its own, a short sale does not challenge most security clearances.|
|Future Employment||Many employers today require credit checks on employees. A foreclosure is one of the most detrimental credit issues an applicant can have and in many cases will challenge employment, especially in financial employment opportunities.||On its own, a short sale does not challenge most employment opportunities.|
|Deficiency Judgment||The bank has a right to pursue you for the deficiency.||In some successful short sales, it is possible to negotiate with the lender and have them give up the right to pursue a deficiency judgment.|
|Deficiency Judgment Amount||The home will go through a REO process if the property did not sell at the courthouse auction. In most cases, this will result in a longer time on the market and a lowered sales price – in which will increase the deficiency judgment amount.||The home should be sold at a price comparable to market value and the deficiency judgment amount may be exempt.|
When faced with a short sale or foreclosure, it is always best to seek professional help immediately. Know exactly what your options are and have a Plan “B” in place, in the event the situation does not quickly improve. The longer you wait the less likely the bank will be to allow a short sale in lieu of foreclosure. The process takes time; however, with the right agent and a responsive bank – many times the foreclosure can be stopped and a short sale can be conducted successfully. At FloydRA, we have experienced short sale agents and a team of attorneys to assist in the process!