Short Sell vs. Foreclosure

Let me start this short conversation by stating that I am in no way an expert on financing  or financial options.  I do not ever intend to give financial advise.  Frankly, if I was an expert at either, I would have retired several years ago.  With that said, I do think that it is important that we, as real estate advisors, make sure that we are guiding our selling clients in the direction to get informed advice from experts if they are in the position to consider foreclosure.  There is a big difference in short sale and foreclosure.  Again, I do not feel comfortable going into this subject in-depth, but I do know that there is a big difference in the long-term effect to your credit depending upon which option that you are able to choose.  Sometimes we are in the position, when we have a home listed, to become the home owners confidant regarding their financial situation.  This becomes a very emotionally charged situation when someone can’t afford to maintain their house payments and their house is not selling.  Although we can provide informed advice on the best pricing scheme, this does not mean that the home owner can afford to sell their home at the market value.  If the home owner risks losing their home, we should be steering them to their lender to have open discussions as to their options.  In a short sell, there is an agreement by the lender to allow the home owner to sell their home for less than they owe the lender.  With this option, the home owners credit is not as adversely affected as with a foreclosure.  In a foreclosure, the lender takes back the property and the foreclosure has a longer, more detrimental affect on the credit rating.  Either option is not the primary aim when we discuss listing a house with an owner, but often circumstances beyond our control lead us down that path anyway.  Guiding that owner to get the financial counseling that they need is the least that we can do to help in that situation.  How do you handle that type of situation?

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