| Factor | Short Sale | Subject-to |
|---|---|---|
| Timeline | 3–6 months (bank approval needed) | 10–15 days (no bank approval) |
| Your Credit Score | Hit of 100–160 points | Usually no hit (you're not in default) |
| Tax Consequence | Forgiven debt is taxable income (unless protected by Sec. 108) | No tax on forgiven debt (lender gets paid) |
| Realtor Commission | Usually 2–3% (reduced from 6%) | $0 |
| Seller Out-of-Pocket | $0 (buyer pays realtor) | $0 |
| Your Liability After Sale | Released from the loan (usually) | Your name stays on the note; you remain liable |
| Due-on-Sale Risk | Lender must accept the short payoff | Lender may invoke due-on-sale; must be disclosed |
| Best If... | You need the credit hit to be clearly lender-approved; you want off the note 100% | You want out fast, have no income, can't qualify for short sale approval |
The Bottom Line
Short sale: slower, credit damage, tax consequences, but you're off the note.
Subject-to: faster, no credit hit, no tax on forgiveness, but your name stays on the loan and there's risk if we stop paying.
Neither is "better"—it depends on your timeline, your financial situation, and your risk tolerance. Talk to us and we'll help you decide which path makes sense.
Before You Decide
Always consult a real estate attorney. They'll review the promissory note's subject-to clause and the deed of trust. Don't rely on us or a short-sale agent to give you legal advice.
Who Has to Agree to Each One
This is the practical difference. A short sale needs your lender to approve the loss, which means a package, a negotiator and a wait measured in months. A payment takeover does not require lender approval because the loan is not being paid off or altered — which is also why the due-on-sale clause matters, as set out on the page explaining the structure.
What Each Does to Your Credit File
A completed short sale is a settled-for-less-than-owed entry and it reports. A takeover, if payments are made on time, keeps reporting current. That asymmetry is the main reason owners choose the takeover, and the credit page covers both sides including the downside risk.
Where a Short Sale Is Genuinely Better
If you want a clean legal break from the debt and are willing to take the credit consequence and the wait, a short sale gives you something a takeover does not: your name off the note. We will say so when that is the better fit for what you want.
Where a Takeover Is Genuinely Better
When speed matters, when foreclosure is close, when you cannot face a months-long lender negotiation, or when you want the loan kept current. Owners in condo buildings that have lost financing eligibility often find it is the only route left.
The Third Option Nobody Mentions
Sometimes the answer is neither, and the honest advice is to keep the house and rent it. If your numbers say that, we will tell you, even though it means no deal for us. The closing-cost walkthrough is usually what makes the decision obvious.