Short sale vs Foreclosure–What is the Better Option?

Whether you would go for a short sale or let the bank take your home through a foreclosure is not an easy thing to decide. There are a lot of factors that you need to consider in order to really say that you came to the right decision. In this article, we will compare short sale vs foreclosure by talking about the characteristics of both and let you decide what is the best option for your situation.

While it’s easier to just give up on your home and just let the bank take it, it may not be the best option for you. On the other hand, having to sell your property with much better control of the sale process may be too much of a work for some. The decision for short sale vs foreclosure can be best arrived at if you know each of their impact ahead of time before you make a choice.

Short sale vs foreclosure

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The Effects of Short sale vs Foreclosure

As already mentioned, you have more control of the selling process if you go for a short sale. This means that you will have better sleep and peace of mind because you know who you are selling your property to. Since it is a sale, your home will be handled like any sale even if its value is already below its mortgage. On top of that, you will be free from the social stigma of being foreclosed.

Buying a new property after a short sale is not difficult especially if the lender does not require to get paid for the loan and you are not behind on your mortgage. Although you may have a difficult time finding a lender that will shoulder your loan, Fannie Mae guideline still allows you to get a new property and you could immediately qualify for an FHA loan.

As far as selling your property is concerned, it is absolutely beyond your control the moment it is foreclosed because it is now the bank that owns it and they can sell it anyway they want. Buying a property is not easy after a foreclosure because with all the restrictions attached to it, you will be eligible to purchase after 5 years. If there are no restrictions, you will have to wait for 7 years.

For your credit report, it can fall to 105 to 160 points after you are foreclosed and this can stay in there for 7 years.

So which is better when comparing short sale vs foreclosure? It would seem that short sale is the better option but then again, it all depends on you. Remember that short sale is often viewed as an alternative to foreclosure because it doesn’t have all fees and costs involved in the latter to both the creditor and borrower. Although both can be damaging to your credit report, a short sale is a little less damaging compared to foreclosure. Weigh your options properly before you decide.

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