Why Short Sales Are Better Than Foreclosures?

There is no need actually to give you arguments about why short selling your properly is way better than letting it go into foreclosure. The reason for this is that I'm sure that most of you know for sure that there is definitely nothing that is worse than foreclosure. For those of you who need further explanation, your lender will eventually foreclose on your house if you're not able to afford any mortgage payments. They will first notify you, and if you don't comply with their demands, there will be no choice left to them except transferring ownership of your house to them again. This process could have a very negative effect on your financial as well as your personal life, so make sure you understand the consequences clearly before you proceed with anything. For those of you who think that short sales are like angels falling from the sky for the sole reason of saving your life, they might have to think again. Alternative options to foreclosure also produce some damage, but it could never be compared with what foreclosure does. In order for us to learn which of them wins and which loses, we need to see what implications each of them could produce first: 1- Credit rating: While both of these options will make your credit score drop by a substantial amount, foreclosure will definitely bury it into the ground. The average drop that foreclosure can produce to your credit score is around 200 point. However, with short sales, you only get around 80 points removed from your credit score. From comparing these two numbers, there will be no doubt that short selling your property will be less harmful than letting it go into foreclosure in terms of credit rating. 2- Recovery time: Your recovery time is always proportional to how much your credit score has dropped. With foreclosure, you need more than 5 years for your credit to recover in order for you to get another loan. When you short sell your home, it will be a matter of a year or two before you can get another loan for whatever reason you have. 3- Taxes: When your lender declares losses after foreclosure, the IRS considers those as a taxable income for the previous home owner. In addition to all the damage you get from foreclosure, you're going to have to pay additional taxes to the IRS as well. If you short sell your property, the "2007 Mortgage Forgiveness Debt Relief Act" will indemnify you from paying any taxes, but only until the last day of 2012. From this simple comparison, we clearly conclude that short selling your property will be more suitable for you than letting it go into foreclosure. If short selling isn't for you, you can check with your lender, and they will assist you into choosing another suitable option for your situation.