About Short Sale Real Estate

In the real estate world there are many distinct differences between a short sale and a foreclosure. Knowing the difference between these can impact your financial future for many years.  The difference between a short sale and a foreclosure can also impact your reputation.  Review this article to understand the short sale and how it may impact your future.

• The owner in control. He and the realtor will usually negotiate the sale with the buyer. After the negotiations with the buyer are complete the owner will then contact the bank that currently holds the mortgage to complete the sale. This is in contrast to a foreclosure where you have no control over the sale of the property. In the case of a foreclosure, the property will be sold by the bank or at a foreclosure auction.


• A short sale is not a public record.  The neighbors will never know that you are selling your property as a short sale. It is not a legal notice so it is not published in the local newspaper. A short sale is not recorded at the county clerk's office either. There is much more privacy as opposed to a foreclosure.


• You don't have to be delinquent on your payments. Many are under the false understanding that you need to be several months delinquent on your mortgage to consider a short sale. You do not have to be behind on your mortgage to have a short sale. However, you must show that you owe more on the property than the current value of the property. When a property is foreclosed the borrower is typically several months behind on their mortgage payments.


• You will have less damage to your credit score from a short sale. A short sale may cause your credit score to fall by approximately 50 points. A foreclosure will make your credit score drop by a least 100 points.  The term "Not paid as agreed upon" will appear on your credit report when you have a short sale.  It is better to have those terms present rather than a foreclosure on your credit report.


• You will be able to purchase another property. Generally if you have a short sale on a conventional mortgage you must wait at least two years to purchase another property. If you have a short sale on an FHA mortgage you must wait at least three years to purchase another property. If you have a foreclosure you must wait a minimum of five years to purchase another property.