There are various advantages of the short sale over foreclosure although it will take less effort to just allow the bank to take control of your home and walk away. A short sale will be more difficult but some of the advantages include the fact that you are in the driver’s seat with regards to the sale, compared to a foreclosure where the bank is in control, and that you will be able to avoid the embarrassment that may accompany foreclosure.
A short sale will also make it easier for you to buy a house again. Assuming that the bank does not ask you to pay back the original loan and that you have never been late in your payments by 30 days or more, you may be able to buy a new home right away using a mortgage supported by Fannie Mae. If your payments have been late, you may be able to get a Fannie Mae mortgage in just two years. On the other hand, if your home underwent a foreclosure, you will only be able to purchase a new home after five years if the house was your main residence.
With regards to credit score, the short sale is also better than a foreclosure. A short sale does not show on your credit report and the only derogatory effects you will find are caused by late payments or being in default. On the other hand, a foreclosure will cause a substantial reduction in your credit score and this will remain in your credit report for 10 years.
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I am a little confused, in a short sale does the seller get any money or does he just settle with the bank to take over at an amount less than the original loan amount?
Thank you