Short Sale Vs. Foreclosure

Comparison chart

Comparison of Foreclosure versus Short Sale
	Foreclosure	Short Sale
Possibly get paid a $3,000 or more relocation incentive	Not Usually	Usually, Yes
Used when	Borrower defaults on payments	Borrower unable to make mortgage payments, owe more than home’s current worth, and lender agrees.
Who has control of real estate	The Lender	The Homeowner
Sold by	The Lender	The Homeowner
Method of sale	Auctioned at Trustee Sale	Realtor- handled like any other home sale
Initiated by	The Lender	The Homeowner
Impact on Credit Score and Credit History	Can drop 200 – 400 points. Remains on report for 7 years.	Can drop 50 – 150 points. Listed on credit report if the creditor reports the debt reduction to credit reporting agencies.*
Credit Reports After	If a prospective employer or landlord runs a credit check on you, your job or housing application may be denied if you have a foreclosure on your record.	All lenders report short sales differently, however, negative credit stays on your report for 7 years.
Deficiency Judgments After	In California, a deficiency judgment may be filed regarding a hard-money loan if the lender forecloses under a judicial foreclosure versus a trustee sale or if the second loan is a hard money loan and the sale takes place as a trustee's sale. (California Association of REALTORS)	In California, if the home is your personal residence and was financed through purchase money, there is no deficiency judgment.
Future loans	Must report on future loan applications. If you lie, you may be subject to investigation by the FBI for mortgage fraud.	May or may not be reported on future loan applications
Restrictions on future home purchases	Eligible to buy in 5 years with restrictions, or 7 years with no restrictions	Can purchase immediately under certain circumstances**

** If your payments have never fallen behind 30 days late & 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 strange: you may 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 2 years, regardless of whether the home is your primary residence. The wait for FHA is 3 years.

* The credit bureaus typically 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 a no-hit to credit & 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.