Which is better a short sale or foreclosure- I have never been late in 4 years but I cannot continue to pay 1300 a month house payment ?

Asked by Lottie, Phoenix, AZ Fri Jan 7, 2011

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Jon Griffith, Agent, Scottsdale, AZ
Wed May 18, 2011
In almost every case, short sale is better. You MUST talk with a competent attorney who can show you where you stand before you find a competent short sale agent to handle the sale and negotiation.

Loan mods are a joke, despite a few successes. They don't help you in the long run.

Don't have your attorney negotiate the short sale. Have them review the agreement, but they won't do as much work as your agent will do to fight for the right valuation on the property.

Negotiating a short sale is about proving the value of the home in relation to the amount of the offer. It has nothing to do with the legality nor the tax consequences. Once an agreement is presented from the lender, THEN the attorney reviews it and advises you on your next step...to move forward with the sale, or to walk away from the house, etc.
1 vote
Kevin Olson,…, Agent, Colorado Springs, CO
Mon Jan 17, 2011
An attorney and financial advisor are the ones who should answer this question for you. It's a good and fair question, but you need to ask the right people even if it may cost for the right answers.
1 vote
James Wehner, Agent, Scottsdale, AZ
Sun Jan 9, 2011
Everyone's situation is different. The best advice you could receive would be from a real estate attorney and your accountant. You may also consult with a lender to see what it will take for you to get financing in the near future and how either will impact your credit.

A great resource is the Arizona Short Sale Seller Advisory. You can view it here:


You can also reference more information regarding short sales and the seller advisory here:


Best of luck!
Web Reference:  http://www.jameswehner.com
1 vote
Brooke C Mar…, Agent, Scottsdale, AZ
Sat Jan 8, 2011
There truley is not one right answer to the question. Factors that need to be looked at are: What are your future goals? How many loans you have and if you have a HELOC. Was the loan an origonal loan or was there a refi and your received cash? Each person has a unique circumstance. Many homeowners are determining the best exit strategy. This can be quite involved depeiding on your overall situation. If you would like to have a confidential conversation I will be happy to give you additional information based on your needs and situation.

An attorney is also a great resource for someone in your shoes. If you need a name, let me know.

Brooke C. Martin
Designated Broker, Exit Realty Dynamics
Direct: 480-235-0024
eFax: 480-406-6769
1 vote
Bob Movin-On, , Hartford, CT
Sat Jan 8, 2011
Short Sale or Deed-In-Lieu-Of will help you avoid needing to wait 7 years before you can get another mortgage again, those avenues require a waiting period of 3 years.
Short Sales involves a lot of people (meaning your best interest of avoiding a deficiency payment may not be of the best interest of other parties looking to buy cheap) and the home is listed/advertised as such exposing you to potential embarrassment.
Deed-In-Lieu-Of is private, between the bank and you unless you so chose to have an attorney and as long as you deal with it before the home goes to public auction most people will not know you are having troubles.
Or you could avoid it all and go for a loan modification.

Ramifications of Foreclosure, Short Sale or Deed-in-lieu-of Foreclosure

Here are some of the ramifications of foreclosure, short sale or deed-in-lieu-of-foreclosure, there are many more like; insurance rates, your job (yes employers are checking credit records these days).

Your credit score will be reduced by 200-400 points, short sale and deed-in-lieu-of a little less 100-200 points.

All forms of foreclosure stay on your credit report for 10 years.

After you have gone through foreclosure, short sale or deed-in-lieu-of-foreclosure there will be what is known as the "waiting period", this period of time varies for each and can be reduced if you had some type of extenuating circumstances that caused the foreclosure:
Waiting Periods to Buy After Foreclosure – “YES” Short Sale and Deed-in-lieu-of are forms of foreclosure
• Buying after a Walk Away Foreclosure
The waiting period is 7 years
• Buying after a Foreclosure
The waiting period is 5 years with 20% deposit up to 7 years.
• Buying after a Foreclosure with Extenuating Circumstances
The waiting period is 3 years with 10% deposit up to 7 years.
• Buying after a Deed-in-Lieu-of Foreclosure
The waiting period is 2 years with 20% deposit, 4 years with 10% deposit up to 7 years.
• Buying after a Deed-in-Lieu-of Foreclosure with Extenuating Circumstances
The waiting period is 2 years with 10% deposit.
• Buying after a Short Sale
The waiting period is 2 years with 20% deposit, 4 years with 10% deposit up to 7 years.
• Buying after a Short Sale with Extenuating Circumstances
The waiting period is 2 years with 10% deposit.

In addition to the waiting period and minimum down payment, you will be required to have a minimum FICO score and the home purchase must also be the principal place of residence, not a rental nor a vacation home.

Lastly, most loan applications will ask the dreaded question "Have you ever been foreclosed on?" this stays with you for life, many think that because it will not show up on the credit report after 10 years they can answer "no", well lying on a loan application is a felony that carries a major jail term, so be aware.

Bob Patrick
Buy a home after foreclosure, short sale or deed-in-lieu-of
Movin-On LLC
Helping families/people that have lost their homes get back into a new one in as little as 6 months
1 vote
Robert G Her…, Agent, Phoenix, AZ
Fri Jan 7, 2011
I personally helped over 20 families avoid foreclosure in 2010 through the short sale process. I have yet to see where a foreclosure was better than a short sale. Feel free to visit our website to learn more about the myriad of options available to you. The best case scenario is for you to stay in your home by getting a loan modification. If this is not an option, foreclosure should be your last alternative.
Please feel free to visit our website to see the 100+ blogs I've written on this topic.
1 vote
Dagmar Mouri…, , Chandler, AZ
Fri Jan 7, 2011
In Arizona most home owners are protected from deficiency in a foreclosure but not all of them. It depends on the circumstances.
In a Short Sale you need to make sure the lender gives you in writing that he will not pursue the deficiency. Some attorneys say that's not necessary, others think because it has not been decided by the highest court yet, you need to get it in writing from the lender that they will not go after you.
Many lenders will not accept a short sale offer unless you are in default with your mortgage payments. You can call your lender and ask. I recommend you use the housing counceling that is free of charge to have someone help you take a look at the entire financial picture. The market is about to turn for the better and I wonder if you could consider a roommate for a while to get through a difficult time. Much of the value lost will come back. However, I don't think we will go back to the highest values of 2005 and 2006 in a few years.
To find out how much your house is worth and how much you owe on it would be the first step. Then you know if the house is worth fighting for.
Web Reference:  http://www.azbestrealty.com
1 vote
Addie Pettus, Agent, Bethlehem, PA
Fri Jan 7, 2011
Short Sales are typically a better option provided the bank approves it. From a credit scoring standpoint your credit can drop about 200 points with a short sale and about 300-350 points with a foreclosure. It is best to contact your lender and apply for a loan modification first. If your lender will not modify your loan then you should contact a real estate professional about proceeding with a short sale. During this process you should also seek credit counsel to begin mapping out a plan to rebuild your credit after a short sale.

Addie Pettus
Long and Foster Real Estate, Inc
1 vote
Dallas Texas, Agent, Dallas, TN
Mon Feb 14, 2011
Both will tank your credit scores HOWEVER short sale does look better on credit report than a foreclosure.

Contact your lender receive your short sale approval packet

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
0 votes
Todd Hall, Agent, Gilbert, AZ
Mon Feb 14, 2011

I am an attorney and licensed agent in Arizona. I can certainly help you, as I have many others who have asked the same or similar questions. I would be happy to set aside an hour for a consultation at my office, or at a location that works for you. Feel free to contact me at your convenience.

Thank you.
Web Reference:  http://www.twhlawfirm.com
0 votes
Matthew Baker, , Phoenix, AZ
Fri Jan 28, 2011
Bob Movin On is half right, but he forgot a big segment of the market FHA. FHA is three years on Short Sale and Foreclosure and 2 years on BK for the waiting periods before you can Buy again. For FHA if there was extenuating circumstances and your weren't late then you may be able to buy right away. Depnds on your scenario, at my Lender we require that your were never late and either loss of job, job transfer, divorce etc could all be valis reasons to buy a house before the Waiting Period. Reach out to me and I can help you navigate. It is always good to consult an attorney, but also a Lender that can help guide you on what the ramificiations from a lending perspecitive.
Web Reference:  http://www.ApproveMeFHA.com
0 votes
Spirit Messi…, Agent, Tucson, AZ
Mon Jan 17, 2011
I would talk with an attorney, real estate and or bankruptcy. As of now, the Short Sale will have less damage than a foreclosure on your FICO. I would consult experts in the area to help you make your decision and then speak with an experienced Short Sale Specialist there in Phoenix. If it doesnt sell, may end up as a foreclosure regardless but most likely, short sale is the best place for you to start.

Good luck
Spirit Messingham
Tierra Antigua Realty
Tucson, AZ
0 votes
John Conklin…, , Scottsdale, AZ
Wed Jan 12, 2011
Before you make the decision to short sale or foreclose speak with a real estate attorney, I can refer you one if you would like. From a lending stand point if you can short sale your home with out going late you can qualify for a new FHA loan after the fact as loan as your credit score is 640 or better and the loan that your shorted was not an FHA loan. It may take a little while for your credit to rebound, but depending on how high your scores are currently you may be fine. A lot of lenders will tell you that they will not consider a short sale until you are late and even imply that you should go late, this is very bad advice and that is why you need to speak with a real estate attorney before you do any thing. It will make this difficult situation a lot easier and you will be protected. If you forclose you will have to wait three years to be eligable for an FHA loan. Hope this helps.
0 votes
Loren Hoboy, Agent, Phoenix, AZ
Sat Jan 8, 2011
Jeff referred you to Arizona Department of Real Estate's "Short Sale Advisory" -http://www.aaronline.com/documents/ssseller_advisory.pdf This is a good place to start.

Generally a short sale prevents you from obtaining a loan for 2 years, while a foreclosure extends that period to 3 or 4 yr. The hit to your credit score is also less. This time frame applies if you are making all your other payments on time.

In Arizona, after Foreclosure on a single family residence of less then 2 acres, the owner does not get stuck with the remaining unpaid loan balance. In a Short Sale, unless you get a waiver and release of all the debt, the bank or some collection agency can still try and collect the difference. I strongly recommend to my short seller clients that after we get the banks short sale approval letter, that you have an experienced short sale real estate lawyer go over the legal language to protect you from owing the difference. Some banks are making money by selling this "up paid debt " to collection companies that wait until you are back on your feet and then come chase you for the unpaid debt. The lawyer cost is generally between $250 and $350, and is worth every penny. If you can't get release language acceptable to your lawyer, let the Foreclosure happen.

When you pick a listing agent to handle your short sale, if they don't caution you about these and risks adn guide you to a lawyer, pick a different agent. In a short sale choosing a successful and experienced short sale negotiator is critical to success.

Try these links to learn more about your options and the short sale process in Arizona..

0 votes
Sean Heideman, Agent, Phoenix, AZ
Sat Jan 8, 2011
Hi Lottie,

First of all, I would recommend that you speak with an attorney before making a decision about a short sale or foreclosure since we as agent are not allow to provide legal advise. A short sale is better on your credit score and if you continue to make your monthly payments you can often times purchase another home within one to two years. If you stop making your mortgage payments, then you might be able to purchase another home within three to five years. If you foreclose on the home, then you might not be able to qualify for another mortgage for about 7 years.

In most cases, a lender can't come after you for either a short sale or foreclosure since Arizona is an anti-deficiency state which means a lender can't seek a judgment for the remaining balance of your loans. Although if your current mortgage is from a cash-out refinance or your home is on more than 1.5 acres, then they could seek a deficiency judgment against you. With this being said, I you should speak with an attorney before making any decisions and I would be glad to provide you with a few attorney referrals, if you want.

Also, I could send you some additional information on short sale which will explain everything you need to know about the short sale process. Just let me know if you would like this information.

Please let me know if there is anything I can do to help and I am always available to answer any additional question or concerns you might have.
0 votes
Mike Leslie, Agent, Chandler, AZ
Fri Jan 7, 2011
Hello Lottie,

It really depends on your situation. There's no right answer without digging a little deeper to determine what is best for you. Feel free to visit my website or email me directly and I would be more then happy to personally help you. Email- phxLeslie@gmail.com
0 votes
Melissa Schw…, Agent, Phoenix, AZ
Fri Jan 7, 2011
If you are still living in your property you may qualify for the HAFA short sale in which case you MAY be relieved of all your liability on the deficiency and be eligible to receive $3000 to help you move. Either way MAY have tax consequences from the 'debt relief'. In Arizona the Anti-Deficiency Statutes ONLY cover Foreclosures and that is why you have heard about cases where homeowners were held for outstanding losses. I work with sellers in combination with Attorneys and Tax Advisors to make sure each client evaluates their own situation carefully.
Without having more details it is difficult to know what path to pursue at this time. Typically we recommend to try a short sale and if that is unsuccessful for ANY reason including the bank not willing to work with the Homeowner, then let the foreclosure take place. Whatever you do....stay in your home until you review all your options or you may ruin your chances of using the HAFA program.

Melissa Schwartz, e-PRO
Associate Broker
Realty One Group
Short Sale and Foreclosure Resource Certified.
Web Reference:  http://www.AZFineLiving.com
0 votes
Brenda & Ron…, Agent, Mesa, AZ
Fri Jan 7, 2011

It is always a good idea to get the advise of your attorney is these matters. Most will say that the short sale is better than a foreclosure. There are some concerns with a second mortgage on a home if it was not purchase money, but there is not legal precedence. You may want to check with a lender to see if you can qualify for a home and short sale your existing home. There was a program in place for this... not sure how it is working out as many lenders won't look at a short sale until you are delinquent and this would be a problem for a new loan.

If you have questions, please don't hesitate to call.

Best Regards,

Brenda Cunningham
0 votes
Eli Givoni-S…, , Boca Raton, FL
Fri Jan 7, 2011
Hi Lottie,

A short sale is much less of a hit to your credit than a foreclosure. We have a lot of clients that are in your position. We would be happy to help you with a short sale, if that is the route you choose. 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
0 votes
Jeffrey Masi…, Agent, Scottsdale, AZ
Fri Jan 7, 2011
Dear Lottie:

A short sale is better on your credit report than a foreclosure. You have protection in the state of Arizona as we are in a non-deficiency state, where in normal situations the lender cannot pursue the deficiency in your loan if you sell in a short sale or in a foreclosure.

All options available to you are available in the Arizona Department of Real Estate's "Short Sale Advisory". This excellent reviews all options available to you and not just short sales. I would highly recommend it. I keep the Advisory on my website for sellers because it so valuable. Your Realtor can share this document with you.

Jeff Masich
0 votes
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