Short Sale
Whether the lender/investor can levy a deficiency judgment against a seller after a short sale or foreclosure is determined by the state and the provisions of the original Note. A deficiency judgment in a short sale will be a lower amount than in a foreclosure. In a short sale, there are fewer costs to the lender and the home typically sells just below fair market value, therefore the lender’s loss is less.
Foreclosure
Foreclosures carry much higher costs for lenders, and a property typically sells for a deeply discounted price after foreclosure. Therefore the lender’s loss is much greater, making the deficiency judgment amount much greater.
Short Sale
Fannie Mae guidelines state that a seller can purchase their next home 2 years after short selling a property.
Foreclosure
Guidelines state that a seller must wait 5-7 years to purchase their next home after having a property foreclosed upon.
Short Sale
A short sale is reflected as “debt settled for less than full amount due” on a credit report. The actual impact on the credit score is determined by the level of delinquency prior to the short sale being completed and the credit standing of all other debts.
Foreclosure
Foreclosure is the most serious impact on credit.
Short Sale
Short Sales tend to sell at slightly below fair market value, not causing as much damage to home values in the neighborhood.
Foreclosure
Foreclosures sell at a deeply discounted price, causing continued severe depreciation in neighborhoods.
Short Sale
Most landlords view a short sale more favorable than a foreclosure when pulling a tenant’s credit and determining the prospective tenant’s ability to pay rent.
Foreclosure
A foreclosure can impede the seller’s ability to find a suitable property to rent after losing their home.
Short Sale
The seller still has control in that they are voluntarily deciding to sell their home and they are in control over accepting an offer.
Foreclosure
The seller may feel that they have no control and that the bank is forcing them to be evicted from their home.
Short Sale
Short sales do not carry the stigma that foreclosures do, causing less embarrassment to the sellers as they transition out of their neighborhood.
Foreclosure
Despite difficult economic times, there is still a very negative stigma attached to foreclosures.
