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Why is a short sale beneficial in comparison to a foreclosure?

If you are facing foreclosure, you may have considered speaking to an attorney about your options. One of the options he may discuss with you is the use of a short sale. Short sales can be ideal as an alternative to foreclosure, as they hurt your credit rating less and allow you to pay back most of what you owe.

With a short sale, the idea is that you're going to sell a property for less than you owe. You don't have to make up any difference; your creditor will agree (or not) to the terms of the short sale. If the creditor does agree, then whatever price is agreed on will be accepted, and you'll be released from your mortgage.

Short sales do receive some governmental incentives. With the Home Affordable Foreclosure Alternatives program, there are financial incentives provided to lenders and borrowers who decide to use a short sale instead of a foreclosure. The program is generally used when a loan modification isn't possible in your situation.

Short sales come with various benefits, even if you can't sell for what you owe. You'll be able to buy a home again sooner than with foreclosure, and you can take more time to plan your move than with a foreclosure. With a foreclosure, you could be kicked out of your home within 60 days of a sale, while a short sale may take up to a year. You may also receive up to $3,000 in moving expenses from the lender in a HAFA sale, which is something to consider.

Source: House Logic, "Foreclosure Alternative: The Short Sale," Gwen Moran, accessed Dec. 22, 2015

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