That all depends on your point of view. A short sale is selling your house for less than is owed on the mortgage. You must get the approval of the lender to do a short sale. The house is sold and after the commissions, fees, repairs etc. are paid the lender gets the remaining proceeds.
If you have a security clearance required for your employment then a short sale is best. Usually you cannot maintain your security clearance with a foreclosure on your credit report. Short sales do not impact your credit rating nearly as bad as a foreclosure. A short sale will lower your credit score by 50 to 100 points while a foreclosure will drop your credit score 200 to 300 points and remain on your credit report for 7 years. A short sale is usually reported on your credit report as a past due loan that was paid. The time required for a short sale is about 7 months before it is complete.
Downside of the short sale is the lender usually has 6 years to come back to you to collect the short payment on the loan. Since a lot of real estate loans are recourse you stay liable for the repayment even after the property is gone.
If you have some type of mortgage insurance on your loan the lender will not agree to a short sale. Insurance is like a guarantee to the lender by VA or FHA or private mortgage insurance (PMI). In the case of insurance on the loan the lender can only collect if they foreclose on the property.
Call KatTax and we can refer you to an attorney that can help you with your decision.
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