Short Sale vs. Foreclosure SHORT SALE
FORECLOSURE
Whether the lender/investor can levy a deficiency judgment against a seller after a short sale or foreclosure is determined by the state and the provisions of the original Note. A deficiency judgment in a short sale will be a lower amount than in a foreclosure. In a short sale, there are fewer costs to the lender and the home typically sells just below fair market value, therefore the lender’s loss is less.
Foreclosures carry much higher costs for lenders, and a property typically sells for a deeply discounted price after foreclosure. Therefore the lender’s loss is much greater, making the deficiency judgment amount much greater.
Fannie Mae guidelines state that a seller can purchase their next home 2 years after short selling a property.
Guidelines state that a seller must wait 5-7 years to purchase their next home after having a property foreclosed upon.
A short sale is reflected as “debt settled for less than full amount due” on a credit report. The actual impact on the credit score is determined by the level of delinquency prior to the short sale being completed and the credit standing of all other debts.
Foreclosure is the most serious impact on credit.
Impact on Neighborhood
Short Sales tend to sell at slightly below fair market value, not causing as much damage to home values in the neighborhood
Foreclosures sell at a deeply discounted price, causing continued severe depreciation in neighborhoods
Ability to Rent
Most landlords view a short sale more favorable than a foreclosure when pulling a tenant’s credit and determining the prospective tenant’s ability to pay rent.
A foreclosure can impede the seller’s ability to find a suitable property to rent after losing their home.
Emotional Impact
The seller still has control in that they are voluntarily deciding to sell their home and they are in control over accepting an offer.
The seller may feel that they have no control and that the bank is forcing them to be evicted from their home.
Short sales do not carry the stigma that foreclosures do, causing less embarrassment to the sellers as they transition out of their neighborhood.
Despite difficult economic times, there is still a very negative stigma attached to foreclosures.
Deficiency Judgment
Ability to Re-purchase a Home
Impact on Credit
Stigma
IMPORTANT NOTICE: You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender (or servicer). If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay for our services. Platinum Group Services and the Real Estate Company that you are working with have a signed Short Sale Negotiation Real Estate Company Agreement that outlines the fee schedule in consideration of our efforts to negotiate short sales on behalf of clients and agents for said Real Estate Company. Platinum Group Services is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not to agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit rating.