Foreclosure vs Short Sale

foreclosure short saleIt’s a decision that has to be made every month in every neighborhood in the United States. The decision to either let your home go to foreclosure or pursue a short sale with the bank. It’s tempting for people to take the easy road and let the home go to foreclosure. The reason is many homeowners may not know what a short sale is or what the benefits are to doing one.

Simply put a short sale is when the bank will take less for your home than what your currently owe on it. For example if you owe $160,000 on your home and the home is currently worth $150,000 the bank may take a payment of $130,000 via short sale to settle up the loan. So now that you have a brief understanding of what a short sale is lets look at the advantages and disadvantages of each




1. None


  1. It will be at least 7 years before you can buy again.
  2. Ruin your credit for at least 7-10 years
  3. Bank may come back for back payment
  4. Harassing phone calls everyday
  5. Harassing mail




  1. Saves your from foreclosure
  2. Opportunity to buy another house within 2 years
  3. Saves your credit score from having a foreclosure on it
  4. Hurts credit report less than a foreclosure
  5. Buys you more time in property
  6. Easier to find buyer since property is being sold at discount
  7. Don’t have to pay back debt (this is negotiated during short sale process)
  8. Sometimes banks offer moving expenses
  9. Selling price is negotiable
  10. No cost involved
  11. Most banks prefer short sales


  1. Lengthy process: often times 4-6 months if not longer
  2. A lot of paperwork is needed


So I think the decision is clear. If you are debating between a short sale and a foreclosure, you should definitely pursue a short sale. Banks approve short sales everyday and most banks actually prefer a homeowner to pursue a short sale over a foreclosure. Banks get flooded with hundreds and thousands of foreclosures every single month and would prefer to sell your house outright as opposed to taking it back through the foreclosure process. With a foreclosure it’s just another house that is going to cost them legal fee’s and cleaning costs.  With a short sale they can get your house off the books quicker without the expense and headache.