Short Sale vs. Foreclosure

If you find yourself in a financial situation where you aren’t able to make your monthly mortgage payments, you may be wondering what the difference between a short sale and foreclosure is. Credit-wise, short sales and foreclosures are equally bad for your credit; they are both considered to be a debt that has not been “paid as agreed”.

But, is one worse than the other overall? Yes; generally it is better to have a short sale than to have your home foreclosed upon.

Courtesy of Inman News, here is a quick breakdown of a short sale, and of a foreclosure…

Short Sale

When you have a short sale, your credit score drops between 85 and 160 points, depending on the situation. On average, it will take you about 2 years to buy a new home after going through a short sale. However, you are immediately eligible to purchase a new home, if your finances allow you to do so. If you do go through with a short sale, you may qualify for a $3000 relocation loan through HAFA (Home Affordable Foreclosure Alternatives). Additionally, when you do a short sale you are viewed as a more responsible homeowner, versus a homeowner who has allowed their home to be foreclosed upon.


When you’re foreclosed upon, your credit score drops the same amount as it would if you had a short sale (85-160 points). However, you are not immediately eligible to purchase a new home, and on average, it takes homeowners 7 years to buy a new home, versus 2 years if you have a short sale. If your home is foreclosed upon, creditors view you as an irresponsible homeowner, and you’re not eligible for relocation funds or loans.

In the ideal situation, you should avoid a short sale and foreclosure, but especially in this economy, downsizing is a common occurrence, and unfortunate things happen. So, if you find yourself in a situation where you can’t afford to make your monthly payments, get in contact with your financial advisor, your lender, and your real estate agent as soon as possible. This way, you’ll have a better chance of avoiding foreclosure, and getting your life back on track after the sale.

Give me a call, Linda Jonard, to get the details on what your home is worth, if a short sale is an option, and to get your questions answered. I am happy to help!

Linda Jonard
RE/MAX Affiliates


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