Why The Short Sale Option Is Better Than A Foreclosure
Most homeowners have heard of short sales, but few recognize their importance in the foreclosure problem. Many don’t see the point in choosing the short sale option when they don’t get to keep their homes anyway—for them, it’s just foreclosure in a different form. But that’s actually where the similarities end. Foreclosures and short sales are two different things, and for most people, short sale options offer more promise than just letting the lender foreclose. If you’re facing foreclosure and aren’t sure what to do, here are some reasons why the short sale option is always a better choice.
Conventional selling
You can sell your home in a short sale just like a regular home, using the same listings and the same agents. The only thing to keep in mind is that the lender has to approve your buyer’s offer before the sale can proceed. This lets you explore your short sale options and control the outcome. In a foreclosure, on the other hand, all you can really do is watch your home get auctioned off.
Less credit damage
Foreclosures and Short Sale both have a negative effect on your credit score, but the latter is much milder and easier to overcome. After a foreclosure, you can expect your rating to drop by 300 to 400 points. With the short sale option, the drop stays within the 150-200 range, and in a few cases may not even be present. The damage doesn’t last as long in a short sale, either—you can clear it up in about five years, while foreclosures stay on file for up to ten.
Better negotiating terms
You can usually negotiate the price and purchase terms when going through Short Sale Options. Foreclosures don’t let you do that because it’s your lender selling the home—they’ll set the price according to what makes financial sense to them. Also, with the short sale option, you can talk the lender into reporting the sale in a way that doesn’t affect your rating or reduce the tax consequences on your part, which you cannot do in a foreclosure.
Future home buying
You can buy a home sooner after a short sale than after a foreclosure. New regulations have shortened the wait time to two years for short sales, with better terms offered after four years. Foreclosures require you to wait at least five, and even then, few lenders will be willing to give you optimal rates with the foreclosure still on your credit report.
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