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By Sean A. Kelly
When it comes to foreclosure vs short sale, many experts would agree that short sale would win hands down. The reason for it is simply that a short sale may not cause too much damage on your credit report as compared to a foreclosure. My friend, Melanie and my cousin, Amy, both respectively had to make a choice between permitting their mortgagers foreclose their homes or to sell their homes on their own terms regardless of the fact that they would not be getting anything out of it. Melanie decided to call her own shots so she opted for a short sale while Amy figured that she would not have the guts nor the time to take care of things herself so she chose to have her home foreclosed. Each of them took a different road that would basically lead to the same destination. The only difference is one of them would reach her destination without much hassle or obstacles along the way.
With a head to head fight in foreclosure vs short sale, Amy and Melanie each had to go through different channels to achieve their goals. Melanie chose to have a short sale because she wanted to be the one calling all the shots. She wanted to show the bank that although she might be a bit behind on her mortgage payments she was still the owner of the house instead of the bank. However, she was also aware that the value of her home was already lower than the balance amount that she still owed her mortgager. That is why the procedure she chose was called a short sale; she probably would not even break even let alone make any profit from the sale of her home. At least Melanie would know to whom she would be selling her home because she would get to decide which buyer would get her home.
Amy, on the other hand, decided that taking total control of everything was not for her so she decided that if a foreclosure was inevitable she might as well just succumb to it. However, she did not quite have any idea on how the bank would handle the procedures of foreclosing her home so she decided to seek foreclosure help from a financial advisor. Although her advisor assured her that she still had enough time to consider other alternatives, Amy had already made up her mind. She just needed a financial advisor to monitor the foreclosing procedures conducted by her mortgager to ensure that everything was done by the book. In Amy’s case, it was her mortgager that would be handling all the legalities and sales procedure. Amy had no control over anything whatsoever.
Melanie’s decision could stop foreclosure while Amy’s could not. Melanie would not have to wait for a decade before she probably could start purchasing a home again because there would be no record of foreclosure in her credit report. Amy probably would have to wait for at least seven years before she could even buy anything under her own name as the foreclosure would remain a permanent public record. So when a potential mortgager or even landlord runs a credit background check on both Amy and Melanie, chances are they would be more likely to approve a loan or rent a room to Melanie instead of Amy. This is because a person with a record of foreclosure in their credit report would normally be considered as a high risk applicant. The only thing that Amy and Melanie might have in common would be that they both had to be responsible for the income tax imposed on any rescinded debt. Basically, if there are any forgiven debts they would both have to pay taxes on those debts.
Many experts would probably recommend a short sale over foreclosure. Although a short sale is not that great a choice it may be considered as relatively better than having a foreclosed home. It would be like choosing the lesser of two evils. The only difference is that one would leave a permanent mark while the other would not.
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