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Foreclosure vs. Short Sale – which is best

by sfishome on October 29, 2009

Foreclosure vs. Short Sale – which is best?
Well neither is good. But there has been a lot of noise that Short Sales are so much better for owner/sellers than Foreclosures. From what I can tell some of the claimed advantages just aren’t true. There are some advantages though.

Firstly, reviewing pages 3 thru 5 at eFanniemae.com’s 2008 0816 announcement which describes underwriting rule changes in how Fannie Mae treats bankruptcies, foreclosures, short sales and other negatives transfers. If you go through a Short sale, they won’t loan to you for 2 years. If you go through a foreclosure they won’t loan to you for 3 to 5 years depending on whether you had “extenuating circumstances”.

But the “noise” I am referring to about foreclosures supposedly being better than Short Sales is that from all indications your credit rating will get severely damaged in either scenario, and it’s probably unlikely that your credit score will be high enough in 2 years time to qualify for any decent loan.

So is a Short Sale really better than a foreclosure? I think that’s a case by case question…. and one you probably need to discuss with an attorney especially since one of the biggest questions is when and how a lender can go after you for a “deficiency judgement” on the amount owed.

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