A short sale may seem like a great way to avoid the financial devastation of foreclosure, but it’s not always the smartest move. There may be better legal protections by going the foreclosure route and the damage to your credit score may be the same. Here are some things you should know before you decide:
1. Your credit score will tank just the same
A short sale and a foreclosure have the same impact on your credit score because they are both regarded as serious delinquencies, according to a spokesman from Fair Isaac, the company that calculates the FICO score. Other factors, such as what the credit score was before the short sale or foreclosure, may have a greater impact.
2. The lender may come after you for the difference
In a short sale, the bank will almost always try to get you, the homeowner, to sign an agreement to pay back the difference between the amount you owe and the final sale price. It’s up to you, or your attorney, to get the the lender to agree not to pursue any further payment. The demand for payment may come years later, long after you thought you were fully recovered!
3. You’ll have less time to recover financially and emotionally
In Florida, a foreclosure takes several months or longer. This is a time when you are not making house payments, and can help you prepare financially and emotionally to leave your property. You give that up with a short sale. When the house sells and closes, you are out.