Neither choice is a great one.
Simply put, a Short Sale is where your lender approves and allows you to sell your home for less than you owe the bank. Understand the bank must approve the Short Sale, the bank will tell you if you are allowed to accept an offer, you have no control over anything, you must be already behind in your payments, and the most unique qualifcation is your property must be worth less today than what you owe on the property now. In other words, if you paid $300,000.00 for your home – you owe $240,000.00 – and it appraises for $283,000.00, the bank is probably going to deny your request to Short Sale because there is value to pay the bank off in full. An example of an approvable Short Sale would be, if you paid $300,000.00 for your home – you owe $240,000.00 – and it appraises for $203,400.00. Even with an approved Short Sale your credit will be affected, meaning for at least 2-3 years you would not be able to purchase another home. However, if you continue pay all of your other credit lines on time over a 2-3 year period, it would be possible at the end to purchase another home. Understand that missing a mortgage payment is like running a stoped school bus, it doesn’t get much worse than that.
Now lets talk about Foreclosure , thats where you just didn’t make your payment and you either abandoned the property or continued to stay without paying until the sherriff removes you. If you wait until the sheriff comes, you’ll normally be given about 15 minutes to leave the property. After that you’ll have to contact the listing agent to get back in the home to get the rest of your things and you only have a 10 day window to do so. If not removed or agent has not been called in the 10 day time frame then your stuff is subject to trash removal or will be sold. Keep in mind that the laws are different from state to state. As far as your credit goes, asumming you pay all of your other credit lines on time, you’re still looking at a 5-6 year period before you could purchase another home.
So to answer the question, a Short Sale is always better in my opinion. Hope this has been helpful.
