Short Sale Vs. Foreclosure

Should You Choose A Short Sale Vs. A Foreclosure?

There are many considerations to take into account when considering selling your home on a short sale vs. letting your lender foreclose on your home.  Although it might be easy to just let the lender foreclose, that may not be the best decision for you.

Benefits of a Short Sale:

• You get to sell the home and leave on your terms.  This is probably the biggest peace of mind for most people when considering the short sale.  Although you can predict when exactly you're expected to leave during a foreclosure, you will need to find alternative housing when it is actually time to leave.  If you cannot find something in time while waiting to the last minute, you may end up in a bind.
• One of the purposes of the short sale is to get your lender to agree that the money they receive from closing satisfies your mortgage.  IE: you don't want them to come after you for the balance.  In Minnesota, a lender can either foreclose on you, or they can try to obtain a judgment against you for the deficiency balance, but not both.  The main goal of the short sale is to get them to agree that they will not obtain a judgment against you.  Of course if they do, they can legally pursue remedies to seize any assets that you have.
• You may feel better about knowing who is buying your home.  After all, you made the house your home and you'd probably like to know that the next person is going to take care of it like you did.
• You're likely to see a shorter time frame until you can buy again.  The short sale has a negative effect on your credit, the foreclosure will have a greater negative effect.  You'll want to consult a lender for specific time frames and these rules and regulations are continuing to change.
• You're likely to see a smaller dent in your credit and that dent will most likely repair itself much quicker than if you allow the lender to foreclose.
• You will not have to say "yes" to any future mortgage application questions that ask if you've had a "foreclosure or deed-in-lieu in the past 7 years".
• You may be eligible for up to $3000 in moving expenses as part of HAFA.

Benefits To A Foreclosure:

• You may be able to live in the home for a longer period of time without paying the mortgage.  During the short sale process, you will need to move out when the home sells, similar to a standard sale.  In Minnesota, when you allow your lender to foreclose, you will have 6 months from the date of the sheriff's sale until you have to leave.  If you don't move out by then, you can expect the sheriff to come knocking on your door, forcing you to leave.
• There may be a cash for keys offer extended to you by your lender to move out.  In our experiences, a cash for keys offer may be as low as a couple hundred dollars, or as much as $2500.  Lenders will typically offer cash for keys so they don't have to go through the expense and aggravation to evict you.
• You won't have to deal with any showings for prospective buyers during the foreclosure process.

As you can see, the benefits to a short sale almost always outweigh the benefits to a foreclosure.  You'll want to weigh each option available to you so you make the correct decision that is right for your personal situation.  Feel free to contact the Twin Cities Short Sale Realtor with any questions that you may have.