Short Sale vs. Foreclosure

Issue

Short  Sale

Foreclosure

 Credit Score A short sale typically affects the homeowner’s credit score by as little as 100 points The largest impact comes from missed mortgage payments (usually around 30 points per missed payment). A foreclosure stays on your record for 10 years and your credit score potentially lowered 300+ points.
 Credit History There is no judgment for performing a short sale as this is an agreed-upon arrangement with the bank. Upon sale, your mortgage lender usually reports the short sale as “paid”, “settled in full”, or “paid as   negotiated” on your report. A foreclosure stays on your credit report for 10 years and is permanent in public records of the county your property was foreclosed.
 Current Employment A short sale does not show up on your credit report and does not affect current employment. For some sensitive positions, a foreclosure may be immediate grounds for re-assignment or termination.
 Future employment Since a short sale does not show up on your credit report, it does not typically affect future employment. A foreclosure has a large negative impact on your credit score and may affect future employment.
 Future loan with a mortgage company You typically do not have to disclose that you had a previous short sale when requesting a mortgage loan. On a loan application, under Declarations, Section VIII, it   specifically asks a borrower if they have had a property foreclose within the past 7 years. Answering “yes” to this will affect potential interest rates.
 Deficiency Judgment A mortgage lender typically gives up the right to pursue a deficiency   judgment. A mortgage lender has the right to pursue the deficiency judgment in  all foreclosures.
 Deficiency Amount A short sale is sold at or near market value, which is typically a greater value than a foreclosure sale, resulting in lower deficiency. A higher selling price helps cut your lender’s loss. If a home does not sale at foreclosure auction, it becomes a bank REO   property. This results in a longer sale time and potentially higher   deficiency judgment for the homeowner.