subject: Why short sale is a viable foreclosure alternative [print this page] When faced with the risk of foreclosure, many homeowners find themselves with no recourse. Not everyone qualifies for loan modification, repayment plans, or other conventional solutions. But in recent months, many have discovered the short sale as a viable foreclosure alternative. In a short sale, your bank agrees to accept a discounted payoff for your mortgage so you can sell it for less than what you owe. Although you don't get to keep your home, a short sale offers several advantages over simply letting your bank foreclose. If you're having trouble keeping up, below are some of the reasons why a short sale may be the best solution.
You stay in control.
The foreclosure process leaves you with little or no control over the sale. Your bank simply takes over and auctions it off. With a short sale, you maintain some dignity by choosing who gets to buy your home. And since short sale procedures are much like conventional sales, you don't have to go through the whole auction and bidding process, which can be rather stressful.
You save your credit.
A short sale will still have a negative impact on your credit, but compared to foreclosure, the damage is relatively mild. The score drop on a short sale is usually around 100 to 200 points, whereas a foreclosure can pull it down by up to 400. And in a world where credit is essential to your every move, these points can make all the difference for you later on.
You get cleared faster.
The time frame varies from state to state, but a foreclosure generally stays on your file for up to 10 years. A short sale remains on public record for only 5 to 7 years, sometimes even less depending on how it was reported. This allows you to start getting credit sooner, get better deals from lenders, and start rebuilding your finances right after the short sale.
You can buy a home sooner.
Under Fannie Mae rules, one can apply for a mortgage only two years after a short sale. It may seem long, but it's fast compared to the five or so years you have to wait after a foreclosure. And if you weren't more than 60 days behind at the time of the short sale, you can even buy a home right afterwardsalthough it's better to wait until your credit has recovered and can get you better rates.
Why short sale is a viable foreclosure alternative
