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Short Sale vs. Foreclosure: Which is the Better Option

Losing your home to foreclosure due to an inability to keep up with your monthly mortgage payments is one of life’s most unpleasant experiences. It is also an event that keeps on affecting you long after your home is history by devastating your credit score. Regrettably, most people cannot be 100% sure that they will remain safe from foreclosure because they can’t foresee the unexpected. Occurrences such as serious illness, a major accident, divorce or job loss can happen to anyone. So it’s a good idea to understand the available alternatives should the worst occur.

WITH FEW EXCEPTIONS, LOSING YOUR HOME TO FORECLOSURE IS THE WORST OUTCOME.

It’s not just the loss of your home that hurts and damages you; it’s losing your ability to borrow for years to come.  A foreclosure handicaps your ability to reestablish your trustworthiness/creditworthiness.  It haunts and reduces your options when you need them most, making the worst of an already bad situation.  There are, infrequently, unique circumstances when foreclosure may be the lesser of evils; however, those situations are few and, typically, have to do with potential tax ramifications.  Your situation should always be discussed with your tax advisor before making a decision to move forward with a foreclosure.  If you have re-financed your home, or, have a Home Equity Line of Credit (HELOC), you may be subject to a judgment against you for the money you owe on your loans not covered by the eventual sales price of you home.

CONSIDER A SHORT SALE WHEN FORECLOSURE SEEMS INEVITABLE.

A short sale is usually a better options for homeowners mired down with financial problems.  Using the short sale process, you sell your home for less than is owed against it, with lender(s) approval.  Because it can take time to get approved for a short sale, you're best advised to begin investigating your options with your lender(s) sooner than later.  Be upfront about it.  Approach the problem head on.  You’ll get more cooperation from your lender(s) and will be better able to mitigate the negative consequences that accrue during the time you may spend in hope or denial.

SHORT SALES HAVE DISADVANTAGES, TOO.

While a Short Sale will save you from Foreclosure, it will have a negative effect on your credit score, frequently lowering it by as much as 200 points.  However, it can usually be overcome more quickly than the black mark of a Foreclosure, especially if you can manage to retain one or two credit cards and keep them current.   While the IRS used to deem the difference between the mortgage balance(s) on your existing loan(s) and the lesser amount realized from a ‘short sale’ of your property as taxable income, the Mortgage Forgiveness Debt Relief Act of 2007 offered relief to homeowners who would formerly have owed taxes on the ‘gain’ previously calculated from a short sale.  The tax relief has been extended to cover debts discharged through the calendar year 2012.

BOTTOM LINE

Almost any option is better that going through Foreclosure.  My best advice is that you do not go through this difficult time  alone.   Foreclosure is a scary thing.  Find someone, a professional you can trust to work in your behalf.  You need and agent who has short sale experience, who can guide you through the process. 

I can and have made all the difference for homeowners in distress.  I know how the process works, to whom to speak, when and how to initiate the paperwork necessary to getting the job done.

Simply, I will do everything necessary to assist you in avoiding Foreclosure, minimizing the damage to your credit, and assisting you in moving forward as quickly as humanly possible.  My name is Rafael Jorge.  I work at Century 21 Fairway. 

Please call me for an appointment to discuss your options at 760-912-2328

Sincerely Yours,

Rafael Jorge, SFR

Certified in Short Sales and Foreclosure.