Does a Short Sale Hurt Your Credit Less Than a Foreclosure?

Probably not in the way most people mean it. Realtor.com’s economic research team looked at this in a July study and wrote that the credit bureaus score a short sale and a foreclosure similarly. The belief that a short sale is gentler on your credit score, they call a possible myth.

That finding runs against what a lot of websites will tell you, and I’d rather carry the published version than the comfortable one. What a short sale can actually do better for you sits in two other places, and both of them are worth more than a few points on a score.

What Does a Short Sale Actually Do Better?

Two things, per the same study.

First, the leftover debt. A short sale can come with a release from what’s still owed after the sale, if the lender agrees to one. That’s negotiated, never automatic, and forgiven debt can have tax consequences, which changed for a lot of people when the federal exclusion expired in January. A foreclosure in Florida can leave that leftover amount alive in ways a negotiated release doesn’t, because Florida is a recourse state.

Second, the clock on your next mortgage. The study puts the wait for a new conventional loan at roughly four years after a short sale, against roughly seven after a foreclosure. If the plan is to sell, rent for a while, and buy again when the ground is steadier, that’s about three years of difference. For most households that’s the number that matters, not the score.

Is Anybody Still Doing Short Sales?

More every year. Close to 30,000 closed nationally in 2025, and the growth is speeding up: about 4 percent from 2023 to 2024, close to 10 percent the next year, and roughly 16 percent year over year in the first quarter of 2026.

Jacksonville sits near the top of that curve. Short sale transactions here grew 46.2 percent from 2024 to 2025, one of the fastest rates among the fifty largest metros. Tampa grew 64.3 percent.

They’re still rare, about four short sales for every ten foreclosure sales, and I wrote about why on August 8, along with the price crossover: since January, a short sale has recovered about 9 percent more of a home’s value than a foreclosure sale. That piece is on this blog if you want the full picture.

What’s the Honest Trade?

A short sale takes about two months longer to sell than a comparable listing and draws fewer buyers, because lender approval drags and sometimes falls apart. No lender is obligated to approve one. And the other side of the ledger hasn’t moved: a foreclosure lets an owner stay in the home without paying for an average of 592 days, while a short sale asks the owner to cooperate in their own move.

So the choice was never really about the credit score. It’s about whether a released debt and a four year wait are worth more to you than nineteen months of roof. That’s yours to weigh, and the parts that decide it, what you’d still owe, what the taxes look like, what your credit does in your specific case, belong with an attorney and a CPA. I’m neither one.

In other news, I pulled HUD’s list of FHA approved condo buildings this morning, and the Florida numbers are worth seeing in print.

What Does It Mean if My Condo Building Is Not FHA Approved?

It means the ordinary FHA condo loan can’t be written there. An FHA buyer needs the whole building approved, not just their own loan. The lender underwrites the association’s budget, reserves, insurance and finances, and if the project isn’t on HUD’s list, the standard loan doesn’t happen in that building.

As of this morning, 178 condo projects in all of Florida are on that list. Miami-Dade has 17, Broward 8, Palm Beach 2. Up here, St. Johns County has 12, Duval has 6, Flagler has 2, and Clay, Nassau, Baker and Putnam have zero each. Those are building counts, not unit counts, and the list moves as approvals are issued and expire.

FHA does have a narrower single unit approval path for buildings not on the list, with its own caps and conditions, so an unapproved building narrows the lane rather than closing it.

Can I Still Sell if the Building Isn’t on the List?

Yes. What changes is who can buy.

The first time FHA buyer is fenced out of nearly every building in the state. The conventional buyer now depends on the association’s paperwork surviving underwriting, since buildings of eleven or more units go through Fannie Mae’s Full Review as of August 3. What’s left after those two is cash, and cash buys at a discount. For an owner who’s behind on assessments and needs to sell, that buyer pool math is the practical meaning of the list.

On any condo listing, pulling the estoppel and checking the HUD list and the reserve documents in week one tells an agent who can even bid, before the price gets set.

Also of note today, Fannie Mae is selling delinquent mortgages again, for the first time in over thirteen months.

What Happens if My Mortgage Is Sold While I’m Behind on Payments?

Your options travel with the loan. That’s written into the terms of the sale itself.

On Wednesday, Fannie Mae announced a sale of roughly 943 deeply delinquent loans totaling $207.4 million in unpaid principal, plus a smaller pool of about 26 loans in the Dallas-Fort Worth area. Bids are due in September, nothing has sold yet, and the announcement names no geography for the larger pool, so nothing here says Florida. The previous sale like this was announced in July of 2025.

The part a homeowner can use is in the fine print. Whoever buys these loans must honor any loss mitigation already approved or in process. They must offer delinquent borrowers a set of options, including loan modifications that may include principal forgiveness, before starting any foreclosure, except where the home is vacant or condemned. And if a foreclosure can’t be prevented, they must market the home to owner occupants and non profits before investors.

A letter saying your loan has a new owner lands hard when you’re behind. It isn’t a foreclosure notice, and it doesn’t erase anything you were already working on with the old servicer. The new owner is contractually required to offer the same road.

Jacksonville, Florida is my base and distressed property makes up most of my files. My license stops at the Florida line, so questions from anywhere else go out through the SFR® referral network to an agent licensed where you live. If any of this landed close to home, I’ll answer whatever you want to ask. JimArmstrong904@gmail.com, or (904) 671-4161 if you’d rather talk it through.

Jim Armstrong, REALTOR® · Momentum Realty · SFR® (Short Sales and Foreclosure Resource) certified. This is general information, not legal, tax, or financial advice.

Momentum Realty is not associated with the government, and our service is not approved by the government or your lender.

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