What are the advantages of a short sale vs. letting my home go to foreclosure?
January 12, 2010 by admin · Leave a Comment
Answer: The primary advantage to doing a short sale vs. walking away and letting your home go to foreclosure is that in a short sale the debt is settled and you no longer owe the bank any money. If your home goes to foreclosure, you may still be liable for the deficiency in the event that the bank files a judicial foreclosure.
A secondary (but still very important) advantage is that in a short sale, your credit takes much less of a hit compared to a foreclosure. The impact on your credit will vary depending on how established your credit is at the time of the short sale or foreclosure.
Finally, Fannie Mae & Freddie Mac revised their guidelines in August of 2008 with regard to how they view borrowers who have filed bankruptcy, gone through foreclosure or done a short sale. Through these new guidelines, they are in effect severely penalizing those who go the route of foreclosure or bankruptcy, and rewarding or encouraging those who do short sales, which they view as the borrower doing the responsible thing in light of the circumstances.
Per recent Fannie Mae / Freddie Mac guidelines, borrowers who file bankruptcy or go through foreclosure have to wait up to 7 years to buy another home.
By contrast, the new guidelines stipulate only a 24 month waiting period after a short sale, so borrowers who do a short sale can buy again in just 2 years.
