If you have been struggling to make mortgage payments for the last several months but things have been sliding downhill at an increasing rate, you may be faced with a foreclosure. Foreclosures can greatly affect your credit score and make it difficult for you to buy another home within the next few years. Like a bankruptcy, a foreclosure will be visible on your credit report for a very long time.

If you are faced with losing your home, someone may have recommended a short sale to you, which is different than a foreclosure in several ways.

Foreclosure
Foreclosure means the lender receives ownership of the property. You do not pass Go, you do not collect $200. Once the bank has control of your property, it will be sold at auction to the highest bidder, or sold at the lender's discretion. However, you may still be held liable for any difference between the amount you owed and the amount the new purchaser paid for the house. This is known as a deficiency ruling.

Short Sale
In a short sale, you still own the house, and the lender agrees to accept less than the amount owed on the loan. Contrary to the name, a short sale may take months to complete, and your lender may continue to send negative marks against your credit score if you do not continue to pay your monthly mortgage during this time. Although there is no deficiency ruling against a house sold by short sale, the IRS may still count the difference between your outstanding loan and the short sale amount as taxable income.

To find out more about foreclosure law, please contact Lusk, Drasites, Tolisano & Smith, P.A., serving the Fort Myers, Lee County, and Cape Coral areas in Florida.