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What’s the difference between short sales and foreclosures?

A short sale (pre-foreclosure) is when a seller accepts less than what is owed on the property and calls it “settled”.  The homeowner cannot make the payments and must prove that it is due to a hardship.  All liens on the property are extinguished.  There is some credit damage to the homeowner’s credit rating but less than a foreclosure.  A foreclosure will show up on a credit report as a “default” and can take your credit rating down 200 to 300 points and will not be able to get a reasonable credit rating for at least 7 years.  A foreclosure can even leave an opening for secondary lien holders to file suit for unpaid balances and can potentially garnish wages.

Tags: credit report, foreclosure, lien holders, unpaid balances