Short Closures – Short Sale Vs Foreclosure
With the economy being what it is these days, many people are wondering what the best option for selling their home is, especially regarding a short sale vs foreclosure. Since the housing bubble burst, lots of people owning Scottsdale luxury homes are finding themselves upside down in their mortgages (also called being “underwater”). So, what are you supposed to do when you owe considerably more than your home is worth? Here’s a rundown on a short sale vs foreclosure:
* Walking away from your mortgage and having your house foreclosed on may have meaningful long-term repercussions. One of the biggest arguments for doing “a short” vs foreclosure is that with a short sale, you’re often eligible to buy a new home closest (although the wait for an FHA loan is three years). With a foreclosure, you may have to wait seven years.
* Short sales don’t affect your credit, as long as you aren’t behind on your payments. They do not show up as a black mark on your credit, as credit bureaus don’t show the information “short sale” on their reports. Foreclosures, however, do show up on the reports and can drop your FICO score by anywhere from 200-400 points. Additionally, the foreclosure will stay on your report for 10 years.
* With short sales, there are no additional costs. With foreclosures, the bank doesn’t just take your house. Although letting your house go into foreclosure may seem like the easy way out, it can end up costing you more money in the long run. The lender can take things a step further by getting a judgment against you for any arrears you owe, in addition as for the costs involved with the foreclosure action. This can easily add up to thousands of dollars in additional out-of-pocket expenses.
When it comes to debating between a short sale vs foreclosure, negotiate with your bank whenever possible. Foreclosure has long-lasting negative effects, and can make it impossible to acquire credit in the future.