Is a short sale better than a foreclosure or bankruptcy?

The answer is YES. Don’t think it’s OK to foreclose. It’s not OK to think you’ll just let the house go; just mail in the keys and then file bankruptcy and you’ll be protected.

WHAT R U THINKING??? Everyone needs to be accountable and responsible. Trust me; I’ve seen it all. If you have to sell and are stuck in a house that’s devalued and the only way out is to short sell it, then you do what you have to do. However, when you short sell it and the bank is asking for some type of repayment on the short deficiency, please understand unless you have a dire financial hardship you should expect to pay it or arrange some type of payment on a promissory note knowing they’re not going to just let the deficiency go!

What do you expect? I understand people who have lost their jobs, have unexpected health issues; those that are going through tough times not necessarily because of anything they’ve done; they just got caught in a bad situation. In years past they could have sold their house and been OK. Obviously that’s not the case today so I understand those homeowners need some help. I can appreciate the fact they need help and are taking the approach to try and repay some money toward the payoff via a short sale versus just mailing in the keys and walking away.

On the other side of the coin, shame on homeowners who are not taking any responsibility. Those that are strategically defaulting. If someone is telling you there’s no difference between a foreclosure and a short sale you’re getting bad counsel. There’s a big difference and there’s no easy way out. Foreclosure can be devastating to one’s credit. Someone who goes the short sale route generally can buy a home within two years versus a potential 4-5 year delay on a foreclosure and a 7-10 year hit on your credit.

It’s just common sense that when you’re trying to do the right thing and repay some of the loan you’re not going to get hit as hard as you would simply defaulting and doing nothing.

As an employee of a company or a prospective employee a foreclosure is one of the top items that could put a potential new hire in jeopardy. Also, current employers may run credit checks and a foreclosure can put a current position in jeopardy. Security clearances and government positions can be jeopardized by a foreclosure. Also, interest rates will be a lot on higher on credit cards and any credit when a foreclosure is on your record. I had someone tell me they’ll let their house go to foreclosure and then file for bankruptcy so they’re protected. Bankruptcies typically only “delay” the foreclosure. Then the homeowner has both a bankruptcy and a foreclosure. The worst case scenario and one you definitely want to avoid.

No matter what way you slice it walking away is not the answer. You would much rather have the ability to have a power of negotiation with the bank while you still own the property versus letting the courts control what happens. For some reason some people believe that if they let the house go to foreclosure then it will wipe out their deficiencies (depending on whether they have one or two liens). That’s not true; the lender can still pursue the homeowner with a judgment for any deficiency after the property sells under foreclosure. And at that you’re talking a bigger deficiency because they’ll be adding on attorney fees, fees to sell the property, insurance, preservation fees, etc…

Make sure if you’re going through tough times you’re getting the right counsel from educated individuals that have your best interest at heart. It amazes me who people will listen to; if you’re going through tough times financially it might make sense to get your counsel from someone that has their finances in order and is trained and educated to give you the proper counsel and direction.