Is it Better to do a Short Sale or Just Allow Bank to Proceed with Foreclosure?

Common Question: My property is in foreclosure, should I seek a short sale or let the bank take the home in foreclosure?

Answer: It all depends on your situation. Foreclosure can take a long time, especially if you fight it and don’t allow the bank to win by default. So if your income is not currently enough for the rental market, it may be a good idea to stay in the property longer. On the other hand, if you have a job lined up somewhere else, leaving the property in your name longer exposes you to some liability, if the house is sitting empty. Of course, if your income is increasing, it may be advantageous to file a bankruptcy while you still qualify.

Many people believe that achieving a short sale will “save” their credit as long as it happens before the end of a foreclosure. There is no literature that supports this view. If a representative of the bank says something of this sort, have them put it in writing. Once a foreclosure is filed against you, it is a public record, regardless of the disposition. A short sale, a foreclosure, a deed in lieu of foreclosure all represent the same thing: a default by the borrower. In other words, one’s credit is typically ruined before the foreclosure lawsuit by the bank even begins.