This week, we are looking at the
advantages of a short sale over a foreclosure from five different
perspectives: the Sellersâ€™, the Neighborhoodsâ€™, the Banksâ€™, Prices and
the Children. â€“ The KCM Crew
estate professionals are handling an increasing number of distressed
properties. Which is a better alternative for the seller â€“ short sale or
foreclosure? Here are the advantages of doing a short sale:
It allows a more dignified exit from the home.
In a foreclosure, an official eventually comes to the home and tells
the occupants to leave â€“ immediately. In a short sale, the seller knows
the closing date and can prepare in advance for the move. In many cases,
their neighbors, friends and family neednâ€™t even know of their
The seller could possibly avoid a deficiency judgment.
In almost all distressed sales, the bank can legally go after the
seller for the difference between the loan amount and the selling price
(known as a deficiency judgment). Most banks will release the seller
from this obligation in a short sale process.
A short sale has less of a negative impact on their credit report.
Once a short sale is completed, the sellers begin to clean-up their
credit report. The timeline can be much longer as a foreclosure proceeds
through the process.
(For more on this go to: Short Sale vs. Foreclosure: A Short Sale Always Wins)
The seller can return to homeownership more quickly.
If a family allows the house to go to foreclosure, it may take 5-7
years to again qualify for a mortgage. In the case of a short sale, the
timetable can be 2-4 years.
There is a ticking clock on tax relief.
There is currently legislation, the Mortgage Forgiveness Relief Act of 2007,
ensuring that homeowners who received principal reductions or other
forms of debt forgiveness on their primary residences do not have to pay
taxes on the amount forgiven. This legislation is set to expire at the
end of the year.
(For more information: Mortgage Forgiveness Debt Relief Act: Will It Be Extended?)
Tomorrow, we will look at the impact of a short sale compared to a foreclosure onÂ a neighborhood.