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Zoey Tolu

Zoey Tolu

What Matters To You Matters To Me!

Short Sale Versus Foreclosure

Dear Home Owner,

 I am a foreclosure expert who specializes in helping home owners just like you who have fallen behind with their house payments and are now facing foreclosure. I am a licensed real estate agent in the state of California who will have a fiduciary duty to you to look out for your best interest, to work on your best behalf. In other words I am here to help you through this situation, to give you the very best advice and to work for you. I do not work for your lender, I work for you!

Foreclosure is a pretty scary thing because most people do not understand the process of what a foreclosure exactly is. Just like anything else, if you don't understand then it can be scary. Think back to the first time you rode your bike or drove a car. It was probably pretty scary because you weren't sure. Same thing here, you aren't sure what the process is but you know something is going to happen. I will help you understand the foreclosure process and help get you to the other side.


 By this time you have received a fairly thick packet in the mail from the Court House that contained the foreclosure law suit. At this point you have not been foreclosed on but rather you have been served notice that a foreclosure action has been initiated against you. A foreclosure is actually a law suit in which your lender is trying to regain control of their collateral.

In California the whole foreclosure process can take from 3 to 9 months to complete. Currently there are many foreclosures being filed every week so you can see why it takes so long to process. At the very end of the foreclosure process your home will be sold at the Sheriff's Auction and only then will the sale be confirmed by the court. It is at this time your house has been foreclosed on, about 3 to 6 months down the road.

During this entire time period you still own your home. You have every right to live in your home until the foreclosure process is complete. No one including the Sheriff is going to show up at your front door and throw you out. They might pester you on the phone but I can show you how to stop that as well with a simple form. I highly recommend you stay in your home, save up your money, make sure all of your other bills are paid on time and start to re-establish your credit.

There are a number of alternatives to having your home foreclosed on all of which I would recommend you explore. Most likely at this point your options have become limited to either letting your home be foreclosed on or to try to sell your home.

The bottom line is that you do not want to be foreclosed on as it will ruin your credit for up to 10 years. I will show you alternatives that will save your credit and have you buying another home in as little as 12 months.

First, let's first look at the differences between a foreclosure and a short sale

  • Ruined Credit
  • Buy again in 10 years
  • Court Ordered Judgment
  • Large Attorney Fees
  • Possible Bankruptcy
  • Deficiency Judgment(s)
  • No Peace of Mind
Short Sale

  • Bruised Credit
  • Buy again in 12 to 18 months
  • Negotiated Settlement
  • No Cost to You
  • No Bankruptcy needed
  • Debt forgiven
  • Peace of Mind

Let's examine each point one at a time;

Ruined Credit VS Bruised Credit - In a foreclosure your credit can be ruined for as long as 10 years. With a short sale your credit will be bruised for 12 to 18 months. Most banks and lenders understand just about everyone out there is having some sort of credit problem but what they don't want to see is you just giving up. A short sale is a much better alternative to a foreclosure.

Buy again in 10 years VS Buy again in 12 to 18 months - With a foreclosure showing up on your credit report it will be very difficult if not almost impossible to buy anything on credit. No house, no cars, no credit cards, large deposits for utilities and so on. With a short sale your credit will suffer but it has been our experience for those clients who are able to show 12 months of good credit history that banks and lenders are willing to extend credit once again.

Court Ordered Judgment VS Negotiated Settlement - Once the foreclosure process is completed the court will issue a judgment in favor of your lender. This judgment will show up in the public records and on your credit report. A short sale is a negotiated settlement between you and your lender. No need to worry here I will actually be the one who will negotiate for you but obviously a settlement is much better than a judgment.

Large Attorney Fees VS No cost to you - In order to facilitate a foreclosure action against you your lender will need to hire a law firm. The law firm will charge thousands upon thousands of dollars to handle the foreclosure which will be added to the amount you owe the lender. A short sale will cost you nothing to facilitate. In fact, I will handle the entire process for you at no cost to you. How? Your lender will pay my commission once I find a buyer for your home. Even if you owe more than your home is worth I can sell it and your lender will pay all of the fees involved at absolutely no cost to you.

Possible Bankruptcy VS No bankruptcy needed - Many home owners believe they have to file a bankruptcy in order to protect their home. With a short sale there is no need to file a bankruptcy and further complicate your credit problems.

Deficiency Judgment(s) VS Negotiated settlement - If you do owe more on your home than what it may be worth and is foreclosed on, your lender will have the option to chase you for the difference. They will be able to garnish wages, attach personal property and make your life miserable for up to 10 years. A short sale will allow me to negotiate with your lender to release any and all deficiencies before the short sale is completed.

No Peace of Mind VS Peace of Mind A foreclosure will haunt you for up to 10 years or even longer.

A short sale will end the process in as little as 3 to 4 months and allow you to get on with your life. It's your choice.

How Do I Get Started?

It is a pretty easy process to get started. Email me your information to  and I will contact you to answer any other question.

All information contained on this web site is based on personal experience as real estate agents working with clients who either have homes currently in or have had homes in foreclosure. This web site is not intended to offer legal advice, only a qualified attorney can offer legal advice, and we are not attorneys. Therefore, we are not offering legal advice, only information on the general foreclosure and short sale process in the state of California. All information is deemed to be accurate but is subject to errors and omissions and should be verified to your satisfaction.

Fannie Mae and Freddie Mac guidelines when you Short Sell Versus Foreclose


Foreclosure Successful Short Sale

Future Fannie Mae Loan primary residence

A homeowner who loses a home to foreclosure is ineligible for a Fannie Mae backed mortgage for 5 years.


A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years.

Future Fannie Mae Loan non-primary residence

An investor who loses a home to foreclosure is ineligible for a Fannie Mae backed invest-ment mortgage for a period of 7 years.

An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mort-gage after only 2 years.

Future Loan with any Mortgage Company

On any future 1003 application, a prospective borrower will have to answer YES to the "Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?" This will affect future rates.

There is no similar declaration or question regarding a short sale.

Credit Score 


Credit Score Credit score may be lowered anywhere from 250 to over 300 points and will typically affect credit score for over 3 years.


Only late payments on mortgage will show and after sale mortgage will be reported as paid or nego-tiated. This will lower the score as little as 50 points if all other payments are being made. A short sale's effect on a credit report can be as brief as 12 to 18 months.

Credit History 

Foreclosure will remain as a public record on a person's credit history for 10 years or more.

Short sales are not reported on credit history. The loan is typically reported as "paid in full, settled."

Security Clearances

Foreclosure is the most challenging issue for a security clearance outside of convic-tion of a serious misdemeanor or felony. If a client has a foreclosure and is a police officer, in the military, in  the CIA, Security or any other position that requires a security clearance, the clearance may be revoked and the position terminated.


A short sale on its own does not challenge most security clearances.

Current Employment

Employers have the right and are actively checking the credit of e mployees in sensitive positions.  A foreclosure in many cases is ground for termination.

A short sale is not reported on a credit report and is therefore not a challenge to employment.

Future Employment

Many employers require credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment.


A short sale is not reported on a credit report and is therefore not a challenge to employment.

Deficiency Judgment

In 100% of foreclosures (except in those states where there is no deficiency) the bank has the right to pursue a deficiency judgment.

In some successful short sales, it is possible to convince the lender to give up the right to pursue a deficiency judgment against the homeowner.

Deficiency Judgment (amount)

In a foreclosure, the home will have to go through an REO process if it does not sell at auction. In most cases, this will result in a lower sales price and longer time to sale. This might result in a higher possible deficiency judgment.

In a properly managed short sale, the home is sold at a price that should be close to market value and in almost all cases will be better than an REO sale resulting in a lower deficiency judgment.

Also pay attention to this statement

In the mortgage lending industry, any mortgage account that goes more than 90 days late is viewed by the lending institutions as a foreclosure…regardless of whether the home is actually saved or sold at an auction. Ninety days late equates to a foreclosure. Many times homeowners will argue their home didn’t actually foreclose because the mortgage was brought current. However, in terms of borrowing money, if a mortgage goes over 90 days late, then a foreclosure has occured. Although the longer the mortgage goes uncurrent the greater the effect on one’s credit and because a foreclosure could potentially last for an unknown amount of months, short selling the home makes more sense and follows financial literacy principles. However, the sooner a decision is made to short sale a home the greater the chances of receiving the full credit profile benefits of short selling, which include a shorter time in a delinquent mortgage status and the absence foreclosures on your credit reprot.

Waiting is not the solution.  You need to be proactive and the best way is to contact an expert on the matter.