What's Worse? Short Sale or Foreclosure?

You decide you want to do a Short Sale when you are upside down on your mortgage (you owe more than what you can sell it for), there are some requirements that will typically have to be fulfilled:
• The home’s current market value is less than the debt.
• The mortgage is in or near default. Lenders historically will not even consider a short sale unless the loan is delinquent and in default.
• The seller has a true hardship with little hope of bringing or keeping the loan current or of being able to make up any deficiency between the net sale price and the amount of the debt. Some hardships would be loss of job or income, divorce, medical costs, emergencies, death, bankruptcy.
• The seller has no other assets with which to pay back all or part of the debt.
• The borrower is unable to qualify to modify or refinance the loan.
What’s the after effect of having a short sale or foreclosure? A short sale remains on the credit report for seven years; the impact will diminish in a couple of years as long as it is the only blemish on the credit score. A foreclosure will stay for the 7 years. Usually, there is taxable income for the borrower that has a Short Sale.
(The Real Estate Center @ Texas a & M University)