Benefits of a Short Sale

A Short Sale is a much better alternative to foreclosure or a Deed-in-Lieu of Foreclosure, and will do less harm to your credit and future ability to borrow. A Foreclosure will remain on credit reports for 7 to 10 years. It usually takes 5 years before new mortgages may be obtained, with 7 year lending restrictions. With a Short Sale, however, you may be able to purchase a new home in 2 years or less. Further, a Foreclosure on your credit will require you to answer certain questions on application, such as for new loans or even employment with a "YES, I have had a foreclosure."

Therefore, a Short Sale may preserve your future ability to borrow.

For the Homeowner: A Short Sale makes it possible to sell your home for less than the total amount owed. The sale of your home can release you from the debt(s) without having to file bankruptcy or go through foreclosure. So when a lender approves a short sale, the homeowner gains an opportunity to avoid or minimize the damaging affects of a mortgage foreclosure lawsuit.

Both a short sale and a foreclosure will result in about a 200-300 drop in your credit, or FICO, score, so both will have a negative affect on your being able to get future credit. The amount of time it can take for your credit score to recover from a short sale, however, is generally less than the time it can take for your credit score to recover from a foreclosure. And with a short sale, you will likely be able to buy another home within two years over the three to five-year period required for foreclosures.

What is a Short Sale?     Am I a Short Sale candidate?     Short Sale vs Foreclosure

For the Lender(s): Banks do not want your home. Banks are not in the home buying and selling business. Therefore, it is in the bank's best interest to have your home sell. For a bank, a Short Sale can be less costly than foreclosure, can provide an acceptable hedge against future price declines in the market, and means a guaranteed loss now as opposed to an uncertain loss in the future. For the lender, there are many costs associated with a Foreclosure lawsuit, including attorney fees, damage to the property, and property maintenance, and if the property goes all the way to auction, they can lose even more. It is in everybody's best interest to avoid a Foreclosure lawsuit!