As a homeowner, with financial problems, is it best to short sale the property vs foreclosing?

Asked by Buyer, Miramar, FL Tue May 24, 2011

What are the pros and cons on a short sale and foreclosure for a homeowner?

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Loriann M. Harrison’s answer
Loriann M. H…, Agent, Pembroke Pines, FL
Tue May 24, 2011
First I'd like to say that if you are facing foreclosure, please consider a consultation with your attorney. Every situation is different, and you should get legal advice. However, if the option of short sale seems a good one, then i have to agree with my colleagues; short sale generally is a softer hit on your credit than a foreclosure and it is the only opportunity you ay have to negotiate with your lender to reduce or eliminate potential deficiency filing by the bank. Sometimes the lender(s) want sellers to bring a modest amount of funds to closing to settle the file, or take an unsecured loan with very low interest. The key word here is negotiate because we never know what the bank's bottom line is until we have a buyer and they bank has reviewed all pertinent documents. But if the property is actually foreclosed on, the bank will ost likely hold all the cards.

There are many agents doing short sales at this time in the market; short sales have run between 20-45% of the sales over the last few years, however not all agents are certified in doing short sales. It is importat to have an experienced and qualified agent working on the sale of the property and working with the negotiator to obtain the approval from the bank; way too many things can go wrong. If you need assistance exploring this further, please contact me directly since Iam a Certified Distressed Property Expert, (CDPE), with almost 3 years of short sale experience and references. I can also send you some additional information on short sales if you'd like to send me your contact info. In any case, good luck with everything.

Loriann M. Harrison
The Florida Realty Now Team
Keller Williams RPSW

MARS Disclosure for The Florida Realty Now Team, Keller Williams RPSW
The Florida Realty Now Team and Keller Williams RPSW are not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
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Susan J Penn,…, Agent, Weston, FL
Sun Mar 10, 2013
Foreclosure looks easy as we see so many foreclosed homes. In reality, foreclosure is going to cause many issues when it comes to credit and now this is going to be on someones credit report.

Short sale is a much better solution as it will not show up on a persons credit report. You actually can build your credit back up again and turn around and buy another home in two years. i have been selling short sale homes for four years now.'

Susan Penn, PA, SFR, CDPE
EWM Realtors® | A HomeServices of America Company | An Affiliate of Berkshire Hathaway
2000 Main Street, Suite 103 | Weston, FL 33326
T: 954.306.7337 | C: 954.557.5993 | F: 954.515.0200 | |
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Alma Kee, Agent, Tampa, FL
Tue Jul 10, 2012
I see you posted this over a year ago.... what happened?

Also if you still own the house, we now have Deed for Lease programs and lenders are finally doing loan modifications and principal reductions so you may want to get back in touch with your "servicer" (the company you used to pay your mortgage payments to). Note: the "servicer" may not actually own your mortgage so they may not put any effort into reaching out to you.
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Courtney Ste…, Agent, Fort Lauderdale, FL
Wed May 25, 2011
Yes, for many reasons. Most importantly, your credit score, and additionally, if you foreclose on a property the bank can come after you for over 20 years for the delinquent amount owed.

Let me know if you'd like my help.

Courtney Stephens
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Tammy Hayes, Agent, Port Charlotte, FL
Wed May 25, 2011
Here is some information that may be helpful to you.


Short sales are just about seems like you can't get away from them. Many sellers, loan officers and Realtors say they know a lot about short sales, but don't know how the short sale process works or even why a short sale is a better alternative to a foreclosure.

A short sale will enable the seller to purchase a home about 2 years after a short sale completion while a foreclosure will make you wait 5 years. In addition, short sales are better for the lender and it will keep the house occupied, with water and electricity still on and also keep the lawn mowed. Plus the bank will lose less money through a short sale.

No Foreclosure - foreclosures can be a hard and stressful process for a family.

Being Proactive - facing a foreclosure head on will help give you some control over the process.

Start Newer, Faster - minimizing damage to your credit can help you and your family get back on your feet faster.

May not owe anything after the short sale - you can try asking the bank to cancel your debt altogether. It does happen, but not all the time. Primary residences are usually treated more favorably by the lenders.

There is still damage to your credit - when a short sale is done, it is still documented on your credit but won't have the same impact as a foreclosure for most creditors.

Tax Consequences - there may be tax consequences if the bank forgives the debit and will issue a 1099 to the IRS for the amount of debt forgiven.

Bank could demand payment for their loss - the bank doesn't have to forgive the debt. They are able to ask you to pay them back for the difference on the sale and what is owed, but you will need to agree to this.

There are no guarantees in a short sale - whether the bank will approve the sale or forgive your debt, but short sales offer a better alternative to minimize the downside of facing a foreclosure.

Disclaimer -There can be legal and tax consequences. You may want to consult with an attorney or tax specialist before attempting a short sale. A real estate agent cannot give you legal or tax advice.

DO YOU QUALIFY? - Can you answer Yes to all 4 Questions?

1. The Homes' Market Value Has Dropped. Hard comparable sales must substantiate that the home is worth less than the unpaid balance.

2. The mortgage is in or near default status.

3. The seller has fallen on hard times. The seller must submit a letter of hardship that explains why the seller cannot pay the difference due upon sale, including why the seller has or will stop making the payments.

4. The seller has no assets. The lender will want to see a financial statement and recent tax returns.


1. The lender will want to see your entire financial picture.

2. The bank may want you to sign a promissory note for the deficiency between the amount owed and the amount your home is sold for.

3. As the seller, you cannot receive any proceeds from the sale. None. Period. Your Realtor and title company may have to work for reduced fees.

4. The banks are overwhelmed with short sales and many times a decision can take up to 60 days or longer.

5. The property may be foreclosed on during the short sale process. Be sure to use an experienced short sale company who should be able to get the foreclosure postponed.

6. Do not expect to receive information on a regular basis, as there may be weeks that go by without news from your lender.

7. The bank will want to get a BPO (Broker Price Opinion) and/or an appraisal of your house.

8. Be patient. This is the best policy. Try to avoid being stressed out over something that you are not able to control.
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Danielle Sha…, Agent, Cape Coral, FL
Wed May 25, 2011
Consult your attorney and a tax professional before proceeding. If, after doing so, your best option is a short sale contact a CDPE and interview a few you feel comfortable with...

Here is an interesting article I found this morning:http: //
Web Reference:
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Christopher…, Agent, Tarrytown, NY
Wed May 25, 2011
Hi, In regards to short-saling, it all depends on what your hardfship is and if the bank will accept it. A foreclosure impacts your credit score more and for a longer period of time with a foreclosure. You will need a rest perod of about 2-3 years before getting another home loan and even a year or so after that you will get a much higher rate then normal because you are considered a greater risk. There are many modification programs available. I would contact your lien holder directly first to discuss your options.

Web Reference:
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Alma Kee, Agent, Tampa, FL
Wed May 25, 2011
Here is helpful info, and there is a great program (HAFA) for sellers with a genuine hardship that will give $3,000 cash at closing to the seller:

Hope this helps.
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Eli Givoni-S…, , Boca Raton, FL
Tue May 24, 2011
A foreclosure is a bigger hit to your credit. In addition, when we negotiate a short sale, we can also try to get you off the hook for the deficiency. We are a professional short sale service and would be happy to explain the process to you. Please call us directly to discuss your specific situation. Our services are FREE to homeowners. We look forward to hearing from you.

Eli Givoni, Director
Short Sale Department, LLC
Serving all 50 states

MARS Disclosure for General Commercial Communications
Short Sale Department, LLC is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
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Ron Thomas, Agent, Fresno, CA
Tue May 24, 2011
The advantages of S.S. outweight the Forclosure: First of all you will have a place to live for the next (many) months. Secondly, the S.S. does not hurt your credit as badly as a Forclosure. I will give you one caviat: The last time I checked, the Lenders and the IRS will let you out of it if you are considered "destitute" which is their word for no hidden assets. But we expect them to tighten up on this provision; the banks can smell money and they will go after it. Also, the taxes probably do not go with the property; they will remain with you.
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