With the economy the way it is these days, many people are wondering what the best option is to sell their home, especially regarding a short sale vs. foreclosure. Since the housing bubble burst, many people who own luxury homes in Scottsdale have found themselves upside down on their mortgages (also called being “underwater”). So what are you supposed to do when you owe much more than your house is worth? Here is a summary of a short sale vs. foreclosure:

* Giving up your mortgage and foreclosing on your home can have significant long-term repercussions. One of the biggest arguments for doing a “short sale” versus foreclosure is that with a short sale, you’re often eligible to buy a new home right away (although the wait for an FHA loan is three years). ). With a foreclosure, you may have to wait seven years.

* Short sales do not affect your credit, as long as you are not behind on your payments. They don’t show up as a black mark on your credit, since the credit bureaus don’t show the word “short sale” on your reports. Foreclosures, on the other hand, show up on reports and can lower your FICO score by 200 to 400 points. Also, the foreclosure will stay on your report for 10 years.

* With short sales, there are no additional costs. With foreclosures, the bank doesn’t just take your home. Although letting your house be foreclosed on may seem like the easy way out, it can end up costing you more money in the long run. The lender can take things a step further by obtaining a judgment against you for any arrears you owe, as well as the costs involved with the foreclosure action. This can easily add up to thousands of dollars in additional out-of-pocket costs.

When it comes to debating between a short sale and foreclosure, negotiate with your bank whenever possible. Foreclosure has lasting negative effects and can make it impossible to obtain credit in the future.