If you find yourself caught up in the real estate turmoil, are having trouble making payments on your home mortgage and are facing the possibility of losing your home, then you may be asking yourself, “which is better, foreclosure or short sale?”
Well, as you no doubt already know, neither is a great option and if there’s anything you can do to avoid then, do it. However, if you are facing the possibility of losing your home then it’s certainly a legitimate question. So which do you choose?
Here are a few things to consider when trying to make a decision between a short sale and foreclosure:
Some of the benefits of doing a short sale include:
- You are in control of the sale, not the bank.
- You may sleep better at night knowing who is buying your home.
- You will spare yourself the social stigma of the “F” word, foreclosure.
- Contrary to popular belief, you can be current on your payments and still effect a short sale.
- Your home sale will be handled like any other home sale.
How would either a Short Sale or a Foreclosure affect your credit?
While a short sale is not necessarily a derogatory mark on your credit because credit bureaus do not show the word “short sale” on your credit report, tt may say “pay as agreed” or “paid as less than agreed.” Some clients have reported drops in their crediting rating, anywhere from 50 points to 130 points.
In terms of the affects a foreclosure would have, a number of sources have reported that FICO scores usually drop anywhere from 200 to 400 points after a foreclosure, and a foreclosure will typically remain on your credit report as a public record for 10 years.
So while the ultimate decision is one you’ll need to consider carefully, in most cases a short sale is usually ‘the best of the worst’ and for most people is a much smarter decision than a foreclosure.
