Foreclosures vs. Short Sales
What’s the Difference Between a Short Sale and a Foreclosure?
Plenty. For those who’ve been involved in either, it’s a good idea to know what those differences are and how either one will impact your future. Here’s how it breaks down. 
- If you’ve been foreclosed upon, you need to disclose this fact on mortgage applications for the next seven years. Short sellers have nothing to disclose since they’ve avoided foreclosure.
- A foreclosure lowers credit scores considerably. Short sales don’t hit your score nearly as hard.
- Foreclosures remain on your record for seven years. Short sales appear on your record as ‘paid’.
- Security clearances can be canceled or denied because of a foreclosure. A short sale doesn’t affect the vast majority of security clearances.
- People in sensitive jobs could be terminated because of the poor credit caused by a foreclosure. Short sales don’t impact current employment.
- Same holds true for future employment. Applicants with poor credit can be denied. Short sales don’t affect job applicants.
- In certain cases, a lender might be able to get a deficiency judgment against someone they’ve foreclosed upon. Short sellers can negotiate with a lender to discharge the loan when the property is sold.
- Lenders are required to file a form 1099a, which a foreclosed upon party might need to report as taxable income. With short sales, lenders must file a form 1099c. Short sellers may need to report this as taxable income.
Those are the differences in a nutshell. Obviously, foreclosure comes with a much heftier price than a short sale. If you’d like to learn more about the ramifications of both short sales and foreclosures, I’m ready to help. Just contact me at 949.338.7408 or angie@askangie.com. Or follow me @AngieWeeks or @WeeksTeam.
Orange County Real Estate Success 
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