Should You Short Sale Your Home Vs Letting Your Home Foreclose

Should You Short Sale Your Home Vs Letting Your Home Foreclose

Many people don’t know the difference between Short Sale and Foreclosure. As a Real Estate professional I get asked this question way too often. So let me take a few minutes to explain the advantages and disadvantages of both.

Here are some different senerios:

Your home is under water so you decide to just let it go. (Which means you owe more on the home then its worth). Whether you’re still making payments or not.

Your household income status has changed and you cant afford the home anymore

Short Sale Benefits:

Here are a few benefits for doing a short sale that may not have occurred to you:

  • You are in control of the sale, not the bank.

  • You are represented by a professional Real Estate Agent that guides you through the entire transaction and is there to answer all your concerns instead of stressing, asking yourself what if? or losing sleep, thinking to yourself when?

  • You may sleep better at night knowing who is buying your home.

  • You will spare yourself the social stigma of the “F” word, foreclosure.

  • Your home sale will be handled like any other home sale, with respect and dignity

  • Short sale buys you some time to get things in your life together and not being forced out any day.

short sale vs. foreclosure

Buying a Home Again After a Short Sale:

If your payments have never fallen behind 30 days late and the lender does not require that you pay back the loan, Fannie Mae guidelines may allow you to buy another home immediately. Finding a lender who will fund that kind of loan is very difficult. It is easier to find a portfolio loan. If you are current on your mortgage, you can qualify for an FHA loan immediately as well, but lender requirements can be weird such as you have to move more than 600 miles away.

If your payments are in arrears yet a short sale is granted by your lender, you may qualify to buy another home with a Fannie-Mae backed mortgage within two years, regardless of whether the home is your primary residence. The wait for FHA is 3 years.

Typically after a Short sale many people are able to obtain a new mortgage loan and purchase a home within 2 to 3 years of a short sale. Where as if you foreclose and let the bank take your home you cant purchase for 7 or more years.

Affects on Credit After a Short Sale:

Also with a Short Sale once the home is bought and closes and everything else on your credit is paid on time, your credit score should start gradually increasing right away. Where as if the home is foreclosed it’ll take 5-10 years to raise that score again. A short sale may be considered to be a derogatory mark on your credit even though credit bureaus do not show the word “short sale” on your credit report. It may say “paid in full for less than agreed” or “settled for less,” among other categories. Certain HAFA guidelines allow for no hit to credit and can show up as paid in full, ask a Certified HAFA Specialist how. Some non-HAFA clients report small negative FICO score drops from 50 points to 130 points. Major point drops are typically due to being in default, meaning you have fallen behind on your payments for months.

Affects on Credit After a Foreclosure:

Depending on your credit history and other guidlines, shows 2 examples in which a credit score could fall 105 points to 160 points after a foreclosure. Generally, a foreclosure will remain on your credit report in the tradelines section for 7 years.

Length of Time to Move After a Short Sale

If you’ve had a foreclosure notice filed, you may be able to postpone that action while the bank considers your short sale. The wait for short sale approval can be from 2 to 3 months, or longer.

Length of Time to Move After a Foreclosure

Unless prior arrangements have been made, the bank may want you to immediately vacate the property and can commence eviction proceedings.

Taxation After a Short Sale

A personal residence is exempt from mortgage debt relief on a federal level as long as the Feds continue to extend this exemption. Some states will still tax you unless you qualify for an exemption. An investor is not exempt from mortgage debt relief, subject to certain conditions.

Taxation After a Foreclosure

Same as with a short sale. Except some lenders immediately send out 1099s, even if the owner is exempt.

In closing, always obtain legal and tax advice before making a decision between a short sale or a foreclosure.


If you’re home is under water or you cant afford it anymore for whatever reason Ellen Dynov-Dell’Alba can help. Ellen is a NJ Real Estate Agent that Specializes in Short Sales and has done quite a few of them. She has a very successful history. So call her TODAY @ 718-551 8700 and let her help you get a new start in your life and sleep well at night. 


Ellen Dynov-Dell’Alba – Keller Williams Realty Monmouth/Ocean/Middlesex

#NJRealEstatesales #EllenAndThePlatinumGroup #shortsales #foreclosure #shortsalevsforeclosure #njrealestate #homebeingunderwater #losinghome #homesforsale #NjHomesales #ThePlatinumGroup

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Phone: 646-244-0189
Dated: June 24th 2016
Views: 139
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