Choosing Between A Short Sale And Foreclosure

Being the in the position to choose between entering the short sale process or ending up in foreclosure is all too common these days. Many people have ended up in mortgage debt due to unforeseen or uncontrollably factors. Neither a short sale nor a foreclosure is an option that many saw coming, but are being forced into. When it comes to deciding between the two there are a few things to consider.

Your Lender

Perhaps one of the biggest determining factors in choosing a foreclosure or a short sale is the lender. The mortgage lender holds all of the bargaining power and has, ultimately, the final say in the process. However, it is important to remember that lenders do not like foreclosures anymore than the borrower. Lenders stand to lose more money and time in a foreclosure and may be able to recoup most of their money in a short sale. The best thing to do when forced with a decision is to talk to the lender, ask them questions and try to negotiate the time for a short sale. The key component to winning over the lender is effort and intent. It is important to demonstrate willingness to resolve the mortgage debt by actively participating in the short sale process.

Your Credit

It is no secret that a foreclosure can be damaging to a credit report. There can be long term effects that can complicate renting and buying property again in the future. Foreclosures can follow a borrower around for many years, tarnishing their credit report and flagging them as a credit risk for potential lenders. While a short sale is also reflected on a credit report, it is far less damaging than a foreclosure. However, it should be noted that a short sale may produce harder immediate hit to one’s credit report by allowing the mortgage debt to sit delinquent for a longer period of time. This means that pursuing a short sale may damage credit immediately, but will be far less damaging in the long run when the short sale is reported rather than a foreclosure.