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What is the difference between a short sale and foreclosure? Upside down, should I walk away

  • September 16 2011 - Gurnee
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Answers (6)

A short sale is when a property owner sells their home to a qualified buyer for less money than they owe to the lender. Part of the process is asking your lender to allow you to sell the property "short" of what you owe, hence a short sale. Typically, the seller are also asking to be released from paying whatever amount remains. A foreclosure is when a homeowner can no longer pay their mortgage and the lender moves to foreclose. In Illinois, they have to file a suit in court to foreclose and eventually take possession of the property if the homeowner can't pay what they owe. Both moves are serious decisions and you should consult with a real estate professional and a real estate attorney.

  • 1 day ago
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A short sale is typically described as selling your home "Short" or for less than what you owe on it. It has less damaging credit ramifications to your credit score than a foreclosure.  As, once the home closes it shows on your credit report as "PAID IN FULL" or "PAID AS NEGOTIATED".  And it should only drop your credit score a few points, which makes it much easier to recover from. 

A Foreclosure has already completed the eviction process that is eminent if you are unable to sell your home short. 
  • January 25
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Short sales are almost always better than a foreclosure. Banks have now streamed lined the short sales process making the process a little less painful. If you are successful with a short sale, the bank will release you of the balance of the loan. Be sure to consult an attorney & tax professional.
  • August 02 2012
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A short sale hurts your credit less than a foreclosure, but the lien holder NEVER agrees to release you from the resulting deficiency until AFTER the property sells and then they may or may not agree to do it. Do not assume that they will do it. If you have a j-o-b and you have assets and look like a stable candidate then why should they let you off the hook? What they do is sell your deficiency in a bundle with others to a bill collector because they are better set up to go after people. That is not what banks do.
You need to speak with an attorney and perhaps an accountant to review your entire financial situation to find the right course of action.
  • September 16 2011
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Yes, I agree with Felicia. 

A short sale is when you still own the property but will not be able to sell it for what you owe the bank on your mortgage.  The seller typically will negotiate with the bank to take less than what they are owed ... thus the "short" designation.  The bank is willing to do this to avoid the additional costs of foreclosure where they take the property back from the owner due to lack of payment.  In a foreclosure, the owner incurs serious credit issues that take years to resolve.

Definitely talk with an attorney and/or credit advisor, but in most cases you will most likely be better off trying to do  a short sale versus walking away and letting the bank foreclose.

  • September 16 2011
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A short sale is when a seller work with their bank to have the bank agree to accept a lesser amount then they are owed and release the seller from any further financial obligations. If you just walk again and let a foreclosure happen, the bank can come after you for any deficiency. Consult an attorney.
  • September 16 2011
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