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Thursday, December 24, 2009

Which One Is Worse For Me; Short Sale Or Foreclosure?

By Gavin J. King

Let us first understand what a short sale is before identifying its effect on our credit. When a short sale is in order the lender is forced to consider selling the home for less than what is owed to the bank. If the bank is expected to take less than what they otherwise should get, they obviously must approve the short sale before it is allowed to be completed.

Are there any other ways to avoid foreclosure? In the event of a foreclosure, many homeowners can simply wait to be evicted before they choose to leave. Each state does have its own unique laws regarding this so check this out before you try it. In short sale on the other hand, the owner has to make an effort presenting the estate to potential buyers. This does not even ensure that the buyer will make an acceptable offer.

Although it is tiring to have it, it is still a better option. This is because you are able to pay out the mortgage at a discounted value. This makes for an easier time recovering your credit, than if the home owner goes through a completed foreclosure. With a homeowner who illustrates the patience and caring, a short sale will help save both, their credit and their reputation.

There are many in the industry who say the harm that a short sale does to a homeowners credit is major, they do not understand how much more damaging a foreclosure is. Understanding how this affects the credit score is essential in making decisions on how to avoid foreclosure. The homeowner will need their credit score to get their feet back under them, either way. Now do you understand how each affects your credit score?

They say that a short sale is less damaging a foreclosure. I have heard many people say that each affects your credit the same. This is because a short sale is simply a partial foreclosure. In the eyes of many creditors, a short sale is seen as a serious financial failure on the part of the borrower.

That is why any homeowner should really mull things over before executing a short sale. Even though the banks are insured and will not be losing money, the do not readily accept short sales. Remember, your financial state will still be verified. If you have other assets that they can tap into, they will try to do that. They will dig deep into your portfolio to make sure you have nothing left to give. The lender has to be convinced that a short sale is the best option for your condition.

If you do not have any other choice, it is still better to opt for a short sale for various reasons. The benefit of a short sale does not stop at saving your credit score. Another, you will be available to receive a mortgage loan after two years, compare that to the five years you have to wait if your property is foreclosed. Regardless of how much they drag their feet, lenders are helped out with short sales as well. Short sales can minimize the losses that the lenders will endure.

Choosing a short sale is more beneficial than having your property foreclosed. However, this will affect your credit score the same way that the foreclosure would. - 23208

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