About one in every hundred loans sits in some state of the foreclosure process at any given time. A foreclosure can cause a lot of damage to your credit score and make pursuing homeownership difficult for years to come.

A lot of those facing a loan default turn to a short sale instead.

Interested in learning more about short sale vs. foreclosure for your Hayward area home? Allow our foreclosure attorneys to go over the differences between short sale and foreclosure.

Short Sale vs. Foreclosure: The Basics

Short sales and foreclosures both bring a mortgage the homeowner can’t handle to an end. However, the particulars vary.

The loan servicer starts foreclosure proceedings. These happen after a large number of missed payments and lead to the servicer repossessing the home.

The homeowner can initiate a short sale. The short sale process starts either in response to the beginning of foreclosure proceedings or as a preemptive measure. In a short sale, the homeowner sells for less than the full value of the mortgage, and the bank accepts this as payment for the debt.

Short Sale Guide

Short sales require the homeowner to do more of the legwork. In some states, the amount of debt forgiven by the lender also causes a tax burden, as the tax code can treat it as income. This differs from state to state, though.

During the process, the homeowner reaches out to the lender and submits an offer. The homeowner may also have to submit a hardship letter explaining how the situation got to this point and why clemency would be required.

Short sales don’t hurt the homeowner’s credit score as much and may not hurt it at all depending on what the creditor files. A short sale can help you walk away from an underwater mortgage on your Hayward home without hurting your credit.

Here are a few short sale tips:

  • Put your saddest foot forward in the hardship letter
  • Submit authorization for your agent or foreclosure attorney to talk to your bank ASAP
  • Be prepared to negotiate at multiple stages of the process

Foreclosure Guide

Unlike short sales, which require a fair amount of work on the homeowner’s part, foreclosure ends with the owner walking away from the home immediately. Foreclosures can include an eviction, but sometimes the owner has already left the home by the time it starts.

Foreclosures move rapidly once the process starts. Creditors want the money, not the house.

A foreclosure also sabotages the homeowner’s credit rating. A homeowner can lose more than 100 points off a previously high credit rating. Expect to wait at least two years, and potentially up to eight, before getting most types of loans after a foreclosure.

Making the Choice for Your Hayward Home

When choosing short sale or foreclosure, think about the particulars of your situation. Do you have the time and energy to invest in a short sale? Can you get the resources together to protect your credit, or can you safely walk away from your Hayward home?

We can help you sort through your options. Contact us today for all your real estate law needs.