marlarules asked:


We are in a position to approve a short sale on our house. we have to chose between a short sale and a foreclosure. What are the individual ramifications for each on our credit? If we take the short sale, are we going to be taxed on the difference in price between our purchase price and our selling price?

Francisco

4 Responses to “How much worse is a foreclosure than a short sale on your credit?”

1. jpr302001 on February 22nd, 2010 5:45 am

   Leesa

   The effect of a short sale on a seller’s credit report is identical to that of a foreclosure. The ding on credit will show up as a pre-foreclosure in redemption status, which will result in a loss of 200 to 300 points. This means a short sale with a previous FICO of 720 will see it fall from 520 to 420.

2. mr_crankypants on February 25th, 2010 12:50 pm

   Deanne

   Both are bad, but forclosure is worse on your credit and lasts longer. I do not agree with the about.com article posted by the first answerer. Even though it’s hard to imagine, it’s worse to be hit by a train then a bus.

   The difference between the loan payoff amount and the sale amount is taxable income, it doesn’t matter what your purchase price was.

3. M dub on February 28th, 2010 8:49 pm

   Gabriella

   really from a credit perspective they are the same thing. the bank lost money on you.

4. brownie on March 4th, 2010 12:04 am

   Letty

   If you are hit by a train or a truck….you are dead either way!
   I look at credit all day long and a foreclosure and a short sale are the same to me. They affect your credit either way. Both are negative. They will last the same. There are banks that are actually restructuring mortgages right now. You should try to restructure if you want to keep your home. If not it is your personal choice but either way is the same to me. I would take the foreclosure because there are some banks that understand that you are just a victim of the times and there is still life after a foreclosure.(Credit- wise )