What’s The Difference Between Short Sale And Foreclosure Sales

This article discusses some great advice on telling the difference between short sale and foreclosure.

A foreclosure and a short sale have several differences. A foreclosure potentially can damage your credit and gets put on public record; you also should find out if you reside in a deficiency state or not because that will affect this significantly. Alternatively, a short sale will merely show as a tiny stain on your credit and is completely negotiable.

*Video:

In today’s besieged market many people wonder if they have any other option to choose from as opposed to the  bank foreclosing on their house and the answer is yes, a short sale.

The key difference between short sale and foreclosure is the fact that a short sale is not nearly as devastating to a person as a foreclosure. For a quick example, one’s credit score. A foreclosure can truly hurt a person’s credit, while a short sale will only show up as a small mark on it. That is a chief difference between short sale and foreclosure.

You must understand the difference between short sale and foreclosure before you can make a decision on which way to go. A foreclosure can stay with a person for someplace between 7 and 20 years, depending on if you live in a deficiency state (if you do it is 20 years, if not it is 7 years). This has the potential to garnish your pay and a lean on your assets, along with countless other troubles. There are three concerns that can go along with a foreclosure: if you live in a deficiency state a deficiency judgment will be given to you, everything will be put on public record and it has the potential to change your credit score starting now, which is a difference between short sale and foreclosure.

With a short sale there is typically no deficiency. If a bank tells you that they are issuing one it is flexible; everything in a short sale is can be discussed. That is another key difference between short sale and foreclosure. Other differences include the fact that a short sale will not be put on public file and no foreclosure will be seen within your credit score. The bank will record the matter as either settled, paid less than owed or, in some instances, paid in full. This will appear on your credit score as a small speck, comparable to a 60 day late mark.

Many banks now require a person to have fallen behind on their mortgage payments before they can proceed with a short sale.  As soon as all is completed and the property is gone a 1099 tax document will be issued to you. This form  claims why and how much you will have gained by doing so (if the bank acquires a $100,000 deficit you have therefore received a $100,000 gain). In those cases a 1099c will be issued and, despite those documents, most of those gains go tax free and no one ever pays on the amount.

Either way it goes, foreclosure or short sale, it should only be used as a final choice. Contact and discuss the difference between short sale and foreclosure with an attorney, accountant or another knowledgeable person so that you can choose which one is right for you.