Here are the pros and cons of a short sale (SS) vs. a foreclosure (FC).
SS - you take control of your life
FC - the bank has full control of your life
SS - you can dictate, to a greater extent, when you move
FC - the bank kicks you out after the trustee auction on their schedule. Sometimes the marshall comes and escorts you out with whatever you can carry, sometimes the bank gives you a certain amount of time to move out. No guaranees
SS - you can tell your neighbors any story you want about why you are selling or moving
FC - the bank publishes the foreclosure sale in the newspaper and posts a notice of auction on your front door
SS - the negotiations with your lender and how far behind you are in your payments is between you, the real estate professional, and the bank
FC - your loan amount & how far behind you are in your payments is public record
SS - we are seeing 80 - 120 pt hit on your credit score, and it is possible to negotiate this with the lender (number does not include hit for "late payments" and varies from person to person and lender to lender)
FC - we are seeing 200 - 240 pt hit on your credit. You are not talking to the lender so there is not room for negotiation available.
SS - You get nothing from the sale of your home
FC - You get nothing from the sale of your home
SS - You can walk away with your dignity intact
FC - All bets are off regarding dignity, when the marshal throughs you out
I could go on, but this should give you a good picture. If you want more comparisons, you can contact me directly. I will be happy to walk through your scenario with you. I just did that for someone on the East Coast via telephone. He sent me a thank you e-mail and said "When I got off the phone I felt as if a load had been taken off of my shoulders." We can do the same together.
Conclusion, if you want to stay in control of your destiny - do a short sale. If you want to abdicate control of your life to someone else - do a foreclosure.
Just remember in a SS or a FC you, the seller, walks away with nothing. AND In a SS your listing agent will put in many long hours to negotiate your short payoff and get the best results for you. I know, when I do a short sale it takes about 5 - 10 hours to gather information and put together a good short sale package, then you have to market the home and get an offer (standard real estate stuff), then spend hours on hold getting through to the bank, negotiate, negotiate, negotiate and submit justification for the price offered by the buyer (on average 20 - 30 hours for this part), submit more information, check over the final approval letter to insure that your client's assets are covered (that would be you) . By the end of the process the Listingn Agent has 50 - 75 hours into the short sale portion of the process and then the bank cuts your commission to 2 - 2.5 %. Trust me, if it was not because my client want and need my help, I could work a lot less and make more by not doing short sales.
Hope this helps you understand both SS and FC and enlightens you to the process of doing a SS. Make an informed decision, get past this difficult time in your life, and then Dare to Dream.
Real Estate Consultant
RE/MAX Palos Verdes Realty