Foreclosure vs. Short Sale
When a borrower consistently fails to make mortgage payments, the property is foreclosed upon. In a foreclosure, the lender assumes ownership of the property and evicts the borrower. Foreclosed properties may be sold at an auction or via traditional real estate agents. For borrowers, a foreclosure badly damages their credit score.
A short sale is often used as an alternative to foreclosure because it mitigates additional fees and costs for both the creditor and borrower. The negative impact on the borrower’s credit score is typically smaller in a short sale than in a foreclosure. After weighing the pros and cons of a foreclosure vs. a short sale, there is no doubt about it- a short sale is the way to go!