Foreclosure? Short sale?

We're on the verge of foreclosure. We've been 2 months late on our SD property-an investment property. We need advice if foreclosure or short sale should be opted. What would be consequence if we choose foreclosure? Will the lender go after us for the deficiency? How about if short sale?

A short sale is just a last ditch effort before foreclosure. Usually it's a way to save you foreclosure on your credit and hopefully recover as much money as possible for the lien holder.

Try the short sale option, if your lender will allow that. Not a good market for it, but it's a better option than outright foreclosure.

In California, the lender is sol in going after you if it's purchase money. It would sort of affect your credit though. You can try to sell, but with others also trying to sell it may not work out.

short sale is your best option. means they will accept the sale price as the amount you owe on the loan and that is it. if you go to foreclosure and the property doesn't sell for as much as you owe-then they come after you for the difference. in a short sale--they do not.

You also have the option of mitigation of the debt. Your lender shold have a mitigation department that specializes in this. They can lower your rate, extend the term, etc to try and make the payment easier for you if you qualify for it. They would also be the people to speak to about the short sale as well so you could just kill 2 birds with 1 stone.

Consequences of the foreclosure include losing the home, not seeing any profits at all, having your credit scarred with a full foreclosure, and having to explain to landlords afterwards that you failed to come to any kind of solution to resolve the foreclosure. Not to mention having to move furniture, things break, get lost, get stolen, etc.

The lender probably will not go after a deficiency, unless they know that you have a lot of liquid assets and just went into foreclosure to avoid paying your bills. If that's not the case, then it would cost the bank more in time and money to sue you after the foreclosure than they would ever be able to collect. Lenders almost never sue the homeowners after the house has been foreclosed, because they know there is little chance of recovering any of the judgment and the bank will not want to act as a collection agency.

If you do a short sale, there is no deficiency, and the loan is shown as paid in full on your credit. The lender forgives the remaining amount of the debt that is not paid through the short sale, and can not sue for money it has forgiven. You may have to pay taxes on the amount forgiven, though, since the IRS considers this to be income, like the bank gives you the extra money to be used to pay off that portion of the mortgage. Check the tax laws for the exemptions and ways around paying this, there are protections for homeowners in foreclosure, of course.