Examine your mortgage and deed of trust documents to see if a power of sale exists, allowing the lender to obtain a court order, known as a judicial foreclosure, to initiate foreclosure proceedings on your home. Do not leave your home as it can take months for the courts to act on the lenderâ€™s request. Wait to receive a notice of the trusteeâ€™s sale setting an auction date, which can be as soon as 20-days after the notice is received. Plan to leave the property 3-to-45 days after receiving notice that the sale has been transacted. A deficiency judgment may be filed against you by your lender and you may have up to one year to redeem your property. Be aware that the deficiency judgment entitles the foreclosing lender to recoup the difference between the principal owed and the price the house brings at a foreclosure auction.
Protect yourself from a deficiency judgment issued by your lender, and cooperate with a non-judicial foreclosure if no possibility exists for retaining your property. Do not expect redemption of the property, as with a judicial foreclosure, as once the sale is completed you have no right to reclaim it.
Know the type of mortgage you have so as to plan for tax implications of a foreclosure. Do not pay tax penalties for the difference in what is owed and what is received for the sale of your house by the lender if you have a non-recourse or purchase money loan. Expect a tax bill if your loan has been refinanced, is a recourse loan or a line of credit has been instituted against your mortgage. Plan to have your credit standing reduced once a foreclosure has been recorded against you. Wait a minimum of seven years before a viable credit score is restored.
Sell your house for less than what is owed on the mortgage, with the lenderâ€™s approval, to accomplish a short sale. Expect the sale to take up to six months for completion as lenders are only recently responding in a timely manner because of government intervention.
Be aware that in July 2011, California passed anti-deficiency legislation preventing a lender from getting a deficiency judgment against a mortgage holder for the difference in the sale price obtained in a short sale and what is owed on the mortgage. Expect a small decline in your credit score for a short sale whereas a foreclosure reduces it considerably.
source : http://homeguides.sfgate.com/foreclosure-vs-short-sale-california-42167.html