Bankruptcy vs Short sale…

So I found this video on youtube recently where this attorney is telling people that there are “two kinds of short sales”. He goes on to tell people that not only are short sales a pain but they could end up worse off for having done one. I really believe he over simplifies the question. I commented on his video that he is ‘talking his book’.

This is the concept that people always hype whatever it is they are selling like its the best possible answer. For people in foreclosure; Realtors hype selling, because its what they do. Attorneys hype filing BK because its what they do. Investors, mortgage people, loan modification/forbearance companies, all hype what they have to offer. And naturally so.

I get questions all the time about whether it makes sense to do a short sale if you have determined that you need to file a bankruptcy. The thought most homeowners have is “it can’t get worse” so they move on thinking that they have done all they can and with a bankruptcy a short sale would be akin to placing a band-aid on the titanic.

Compounding this problem is more often than not, bankruptcy attorneys think the same way. I have had countless clients tell me that their attorney told them that it wont matter on their credit because the mortgage that is foreclosing will be included in the bankruptcy. The worst scenario is when a homeowner hasn’t filed yet and is told that its better to just file and let it go than to try a short sale.

This could not be further from the truth. The bottom line is, you have to ask yourself this simple question; Does a foreclosure look better on your credit than a short sale. The answer is no.

Attorneys will answer with a myriad of reasons why its sometimes better and sometimes not. Always hedging their bet…I cant blame them, its the attorney way. They are taught to think this way, BUT Ill go as far as to say this: Its never not worth it to try a short sale first.

Honestly, I have yet to have anyone including attorneys show me a reason why to not try and short a mortgage whether they are already in a BK or not.

I have a bit more in depth thoughts on the matter on this article here.