Should I Short Sale My Home or Let the Bank Foreclose?

By Shannon Coe, Realtor, WR Properties


People wonder... Should I short sale my home? Or let the bank foreclose?

In Brentwood California today, there are 656 homes in jeopardy of going to foreclosure. In our little town

of 50,000 people, that is a high number. This is a question that every neighbor of mine has. Where can I get help? Nationwide, over 7.2 million people are facing a financial hardship and are in danger of losing their home. The question that many homeowners have is "Should I let the bank foreclose on my home or should I short sale it?"


First of all, if the bank forecloses on a home this severely affects the homeowner's credit score. It will take 3-7 years to recover from a foreclosure in most cases. One thing many people don't realize is that the bank may issue a "deficiency judgment" against the homeowner to collect the money owed to the bank. In some cases, the bank issues a "wage execution order" and garnishes the pay check of the homeowner until the money is paid back. You will need to seek attorney advice and tax advice. This can financially and emotionally cripple the homeowner for a long period of time.


What is a short sale? A short sale is when a homeowner has a financial or other hardship and needs to sell the home even though they owe more than the home is worth. This can be scary for some people, they are worried about tax consequences or legal issues. All homeowners should check with a tax attorney and get legal advice before foreclosure or short sale. The longer you wait and the greater the amount you are in arrears, the less likely it becomes that your lender will even be willing to discuss a short sale. In addition, the tax relief act is scheduled to expire and may put more hardship on families. In a short sale, a homeowner's credit score will drop around 100 points. Credit will be affected for two or three years. It is affected more for every missed payment, so you really want to have a short sale closed as soon as possible. You do not want to just "sit " in the home because you will continue to lower your score. l have a team that goes over all the steps and we do the best we can to protect the homeowner from any deficiency judgments so that there will be no further debt obligation. California just passed new Deficiency Laws to help homeowners in a short sale. The truth is that we cannot control the banks, only negotiate the best settlement with them.


The reality is that both foreclosure and short sale are damaging to your credit and to the mental health of the person having to go through this process. That being said... going through foreclosure is severely and financially damaging and will affect a home seller for a long period of time. In a short sale, the homeowner's debt usually is forgiven and the homeowner can recover financially in a few years.


The best thing is to get advice sooner rather than later. Go to your local Realtor, Tax Attorney, BK attorney and your bank. Many people just received Loan Mod denials, so decisions need to be made. If you know of anyone who is facing a financial hardship and in danger of losing their home, please call me. I will be glad to discuss their options and help them minimize the financial damage they may be facing.


Jodi Marfia



Shannon Coe

WR Properties




This article is written by Shannon Coe and first published on August 19, 2011 so some information may be outdated after some time. It is posted as an informational and promotional piece by Shannon Coe and does not necessarily reflect the opinion of the publishers