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Foreclosure vs. Short Sale: What is the Difference?

Liane Pruchnik

Foreclosure vs. Short Sale

You can’t talk to someone or pick up a newspaper without the topic of the struggling real estate market meeting you head on.  Real estate foreclosures and short sales are hot topics right now, but do you know what the difference is?

Here a short tutorial to get your facts straight and help you get a better grasp on the ever changing Chicago real estate market.

Credit Score:

Foreclosure: Affects your score for over 3 years. Lowers score from 150 to over 300 points
Short Sale: The effect of a short sale can be as short as 12 to 18 months. Lowers your score as low as 50 points if all other payment are being made.

Credit History:

Foreclosure: Public record on a person’s credit history for 10 years or more.
Short Sale: Not reported on credit history. Loan is usually listed as paid in full or settled.

Ability to Secure Mortgage in Future:

Foreclosure: You will be asked if you’ve had a foreclosure in the past and you must answer honestly. This will affect future rates.
Short Sale: No questions on applications pertaining to a short sale.

Securing FUTURE Fannie Mae Backed Loans on Primary Residences:

Foreclosure: Ineligible for a period of 5 years.
Short Sale: Ineligible for a period of 2 years.

Current Employment:

Foreclosure: Employers have the right and do check employee’s credit and it will show up.
Short Sale: Not reported on a person’s credit report and should not be a challenge with current employer.

Future Employment:

Foreclosure: Employers do check potential employee’s credit and a foreclosure on your credit report can be the greatest hindrance for someone looking for new job.
Short Sale: Not reported on a person’s credit report and should not be a challenge with current employer.

Security Clearance:

Foreclosure: A foreclosure can be as serious as conviction of misdemeanor or felony. If you are a government employee, military, police officer etc. it can be revoked
Short Sale: Does not challenge most security clearances.

Fore more information visit the Distressed Property Institute.


  • carrie 5 years ago

    That was very useful information and I am sure that it will help everyone in those situations know what to expect.

  • Melissa 5 years ago

    Very interesting. It clearly explains the available options how the either decision will impact the homeowner.

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