Short Sale vs Foreclosure In California

The main advantage of when a homeowner sells through a short sale is avoiding the foreclosure stage. This means you will be free from all or some of your mortgage obligations even though your house is underwater.

Foreclosures generally require a long process. It may last from months to years, depending on how quickly the court can decide since they deal with many foreclosure properties.

If you list your home for sale on the market via a short sale, you can save time and effort. Short sale properties are also sold without renovations, which can save you money.

Although a pre-approved short sale can impact your credit report, you can recover from it faster than foreclosure. You will see an improvement in your credit score after two years of selling the short sale property, and you’ll be allowed to get financing approval for a new home.

In a pre-approved short sale, certain lenders may cover agent fees and closing expenses, understanding the homeowner’s financial position.

You can remain in the property until the short sale is finalized. However, this isn’t feasible during foreclosure as the property must be emptied before it can be sold. This is akin to municipal auctions, where the owner must vacate the property. The owner remains accountable for any outstanding taxes.

If you qualify for relocation assistance during a short sale, the lender will provide you with a certain amount that can cover moving fees, a security deposit to a new apartment, etc.

If you choose a short sale over foreclosure, you may lose any equity in your home. Plus, there’s the risk of losing your home altogether, which could worsen your financial situation, especially if the lender demands payment for any remaining debt.

If you lack funds for a down payment on a smaller home, consider renting until you’re financially stable again.

In a short sale, the homeowner and their realtor aren’t the only ones in the mix. The lender and the company handling the short sale talks with the lender also play a role. This can add complexity and drain the homeowner’s energy.

Short sales can get complex. When there are many liens on a property, everyone involved needs to agree to the sale. Those holding the liens usually want a share of the sale money before they okay the short sale. If not, they may start foreclosure.

Depending on your mortgage provider, they may forgive or not forgive the remaining amount on the short sale. If they don’t forgive it, you’ll still be responsible for a deficiency judgment. Your lender can take legal action to reclaim the outstanding debt.

Assuming you were able to submit all the requirements to be granted relocation relief, the amount you’ll receive can be taxed. In other words, you won’t really get the full amount you initially thought you’d get when you opt for a short sale.

Lenders prefer helping homeowners over losing money in foreclosures. So, they may adjust your mortgage or suggest refinancing to ensure you can make payments. Negotiating mortgage terms usually happens only when foreclosure is imminent.

Practically, once foreclosure starts, paying a couple of months’ worth won’t halt it unless you settle the entire debt. If losing your property is inevitable, you can cease monthly payments at the onset and stash your funds for later.

Practically, once foreclosure starts, paying a couple of months’ worth won’t halt it unless you settle the entire debt. If losing your property is inevitable, you can cease monthly payments at the onset and stash your funds for later.

Similar to a short sale, the loss of a home is the hardest part of going through foreclosure. Although you can potentially buy it back through the right of redemption, the chances are very slim given the financial hardship you are in. 

When a property goes into foreclosure, it can lower your credit score by over 100 points and remain on your credit report for at least seven to ten years. This could make it challenging to secure a new mortgage for a home in the future.

Short sales can get complex. When there are many liens on a property, everyone involved needs to agree to the sale. Those holding the liens usually want a share of the sale money before they okay the short sale. If not, they may start foreclosure.

Depending on your mortgage provider, they may forgive or not forgive the remaining amount on the short sale. If they don’t forgive it, you’ll still be responsible for a deficiency judgment. Your lender can take legal action to reclaim the outstanding debt.

Depending on your mortgage provider, they may forgive or not forgive the remaining amount on the short sale. If they don’t forgive it, you’ll still be responsible for a deficiency judgment. Your lender can take legal action to reclaim the outstanding debt.