There are several differences between foreclosure and short sale.
Foreclosure or Short Sale? or Deed in Lieu of Foreclosure?
A foreclosure stays on your credit for several years but the question “Have you ever had a foreclosure?” is one frequently seen, especially in home loan applications. A foreclosure is advertised in the newspaper for several weeks, then offered for sale “on the courthouse steps”, the legal process in Georgia. If the home doesn’t sell in this process, you will have someone come to your home to determine if the home is vacant. You will be notified many times to leave the home but after foreclosure, eviction typically starts right away.
A short sale is often reported as “paid as agreed” and any negative impact on your credit score can be eliminated over a short time if all other payments are made on time. Many lenders offer “relocation assistance” to owners during a short sale. The most we’ve seen paid is $10,000, this is determined by the financing type. Click here to find out how your lender works with short sales.
Deed in Lieu of Foreclosure
Sometimes homeowners just want to “turn over the keys”. This is called Deed in Lieu of Foreclosure and can be a good option. Lenders won’t allow this without having the home listed for sale for a minimum of 3 months first.
The process for a short sale is to request the short sale package from the lender. It is an extensive questionnaire for information on the cause of delinquency, financial information, and if you still occupy the home. The lender usually won’t provide a list price so it’s determined by your real estate agent. After the offer is submitted, the lender will order an appraisal or Broker Price Opinion, then make a counter offer if the offer is not sufficient. It can take several months to get final approval but once the bank agrees, they expect the buyer to close within 30-45 days.
A deed in lieu of foreclosure is similar to a short sale as far as credit impact goes, but it does require that you go through the short sale process first.