Which is worse short sale or forclosure?

[elaineandmichaelsmommy]

And do foreclosure and bankruptcy go hand in hand. We've been trying to sell our house for the last 10 months and to top it off last weekend the house was vandalized pretty badly so dh and I have decided to cut our losses and take a short sale. We've knocked the price down to $49,000 and our realtor says her phone's been ringing off the hook but we haven't recieved an offer yet. And I've heard that even after you get an offer it can take as many as 6 months until you're able to close.

This bothers me a LOT because I see it as throwing a LOT of money for us down a black hole for several months when I could be putting it to better use paying for OT for ds. So while it's not what we would prefer we're beginning to consider willingly going into a forclosure because we simply cannot sell this house or rent it out for any reasonable amount and frankly the only thing holding us back from it is wondering if having a forclosure would force us into bankruptcy which we don't need because we can pay our bills we just can't sell the fackata house.

So I'm wondering if anyone else has dealt with anything like this or has any advice. Please......advice would be great or at least maybe a btdt?

[tmahanes]

No BTDT but the house across from us was short-saled and the process was very quick for them... it was only like 2 months from time they put it on the market until someone else moved in!

[TwinFoxes]

For your credit, a short sale is better. I have no btdt, but I had to do a few stories on foreclosure while I was still working in news. Foreclosure doesn't automatically force you into bankruptcy, but it REALLY screws up your credit. I don't know if you know this, but a lot of employers are looking at credit scores before hiring. And not just government agencies, but private sector employers. So having bad credit can screw up your job prospects for up to seven years, on top of all of the other more commonly known problems with bad credit reports (hard to find a rental, hard to get a car loan or credit card, etc.)

I think PPs neighbors are lucky. There are nightmare stories about short sale offers that banks just sat on, and sat on. But you could be lucky too.

Good luck.

ETA: Also, banks certainly don't have to accept a short sale. So you could end up waiting, and have it rejected. (I'm not advocating foreclosure, but just wanted to point this out.)

[smcdonald2]

My mom's a realtor and she's always said a short sale is MUCH better. Most people try to swing a short sale in order to avoid foreclosure. It's a faster process and a much faster recovery for your credit.

[brittone2]

I read a recent article saying that banks are figuring out that short sales are often much better for *them* financially as well. They net more money w/ the short sale most of the time.

[JBaxter]

Check your laws but I have read about banks coming back for the balance owed on the loans from a short sale. AFTER you get back on your feet and income is coming in. If you do a short sale make sure thats not the situation.

[vonfirmath]

Check your laws but I have read about banks coming back for the balance owed on the loans from a short sale. AFTER you get back on your feet and income is coming in. If you do a short sale make sure thats not the situation.

If they forgive the balance, then you will be taxed on it as income at tax time.

[hillview]

Very complicated. I found this website very useful for my grandma's house. http://www.loansafe.org

/hillary

[codex57]

If they forgive the balance, then you will be taxed on it as income at tax time.

If it's your primary residence, there's an exception at the fed level and possibly at the state level too.

Short sale is MUCH better. Dings your credit less and you can buy a home (or make other big purchases on credit) a lot sooner. We short sold our house, but it was a strategic one. I was a bit nervous about the tax cuz my state legislature's always got their heads up their wahoos but they finally agreed to match the fed exemption.

[mom_hanna]

Bankruptcy and foreclosure do not go hand in hand. Many times people who are being foreclosed on, file for bankruptcy because that protects your primary place of residence. The bank cannot foreclose on a house that is part of a bankruptcy filing. If you are not currently living in your house, you would not have a reason to file for bankruptcy. Hope that makes sense.

Jennifer