From your Seminole County short sale realtor and foreclosure lawyer, and back by popular demand, is the short sale versus foreclosure table. As you can see, there are many advantages to a short sale over foreclosure, particlularly if you qualify under the HAFA short sale program. I originally posted the “>Seminole County Short Sale versus Foreclosure table in this post.
Call with any questions, thanks!
| FORECLOSURE | SUCCESSFUL SHORT SALE | SUCCESSFUL HAFA SHORT SALE | |
| Future Fannie Mae Loan Primary Residence | A homeowner who loses a home to foreclosure is generally ineligible for a Fannie Mae backed mortgage for 5 years. | If a homeowner succesfully negotiates and closes a short sale, they will be eligible for a Fannie Mae backed mortgage after only 2 years. | Same as a regular short sale. |
| Future Fannie Mae Loan Non Primary | If an investor allows a property to go to foreclosure, they are ineligible for a Fannie Mae backed investment mortgage for 7 years. | If an investor successfully negotiates and closes a short sale, they will be eligible for a Fannie Mae backed investment mortgage after only 2 years. | Same as a regular short sale. |
| Future Loan with any Mortgage Company | If you apply for a mortgage in the future a prospective borrower will have to answer YES to the standard application form that asks “have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?” This will affect future interest rates. | There typically is no similar declaration or question regarding a short sale. | Same as a regular short sale. |
| Credit Score | Your credit score may be lowered anywhere from 250 to more than 300 points. A foreclosure will typically have a negative effect on your credit score for over 3 years. | Only late payments on mortgage will show, and after sale, mortgage is normally reported as ‘paid as agreed’, ‘paid as negotiated’, or ’settled’. This can lower the score as little as 50 points if all other payments are being made. A short sale’s negative effect on your credit score can be as brief as 18 months. | Same as a regular short sale. |
| Credit History | Foreclosure will permanently remain as a public record. Foreclosure shows on a person’s credit history for 7 to 10 years or more. Poor credit scores may affect your ability to obtain employment, credit cards, rental housing and insurance. | A short sale is typically not reported on a credit history. There is no specific reporting item for ’short sale’. The loan is typically reported ‘paid in full’ or ’settled’. | Same as a regular short sale. |
| Security Clearance | Foreclosure is the most challenging issue regarding a security clearance outside or a serious misdemeanor or a felony conviction. If you have a foreclosure, and you’re a police officer, in the military, in the CIA, security or any other position that requires a security clearance, your clearance may be revoked and position may be terminated. | A short sale typically does not provide a challenge to most security clearances. | Same as a regular short sale. |
| Current Employment | Employers have the right to check your credit and they actively check the credit of employees in sensitive positions. A foreclosure may be reason for immediate reassignment or termination. | Short sales are typically not reported on a credit report, so there is not challenge to employment. | Same as a regular short sale. |
| Future Employment | Many employers require a credit check on all job applicants. A foreclosure is one of the most negative items on a credit report and in most cases may challenge employment. | Short sales are typically not reported on a credit report, so there is not challenge to future employment. | Same as a regular short sale. |
| Deficiency Judgment | If your lender forecloses on your home, it can get a deficiency judgment against you. The amount of the judgment is the total amount owed to the lender, less whatever the lender could recover through a foreclosure sale. | In a successful short sale, it is possible to convince the lender to give up the right to pursue deficiency judgment against the homeowner. The lender, however, does not have to agree to pursue a deficiency judgment, and can agree to a short sale and then pursue the deficiency. | In a succesful HAFA short sale the lender and any second lien holders are required to waive the right to pursue a deficiency judgment against you. |
| Deficiency Judgment (amount) | In a foreclosure, the home will have to go through an REO process if it does not sell at auction. The vast majority of foreclosures do not sell at auction. In most cases this will result in a lower sales price and longer time to sell in a declining market. This will likely result in a higher deficiency judgment. | Even if the lender pursues a deficiency judgment against you after a short sale, the amount should be significantly less than in a foreclosure. Prices of short sales tend to be higher than REO properties, so the higher sales price results in a lower deficiency judgment. | In a succesful HAFA short sale the lender and any second lien holders are required to waive the right to pursue a deficiency judgment against you. |
| Moving Assistance | None. | None. | Up to $3000 in relocation assistance, paid at closing. |
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