Go Short Sale or Let ‘em Foreclose?

Information to help you decide - Go Short Sale or Let ‘em Foreclose?

Most homeowners aren’t up to speed on the difference between a Short Sale and a Foreclosure. They only know that if they can’t pay their mortgage and keep their home that they worked so hard for, one of the two is in their future.

NOW HEAR THIS! A SHORT SALE has less serious consequences for the homeowner than a foreclosure. Let me explain a few of the finer points … Credit scoring after a SHORT SALE may be reduced by as little as 50 points if you’ve kept everything else current and may count in the scoring for only 12-18 months; whereas, a Foreclosure can lower your credit score anywhere from 200 to 400 points and may affect your credit score for 3 years, or more. The major credit scoring companies may change practices in the future but that’s where it’s at today.

A homeowner who successfully completes a SHORT SALE is ineligible for a Fannie Mae backed mortgage after a mere two years whereas the homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years. Investors are another story for another day.

The next issue is Mortgage Debt Relief, this is a biggie, and as I don’t make it a habit to comment on tax issues (I’m a REALTOR not a CPA) check with your tax consultant and ask them to explain what you’ve read here… http://www.irs.gov/individuals/article/0,,id=179414,00.html

The majority of homeowners aren’t interested in the fine points discussed herein and are mainly interested in “what’s happening to me and how can I make it better” and that’s OK. Just remember this…A foreclosure is a sure thing – just don’t make your payments – you can’t miss. A SHORT SALE is not so sure. There are specific requirements necessary to qualify for a SHORT SALE (Hardship, i.e. mortgage payment increases from interest rate changes, job loss, illness, etc.. ) plus if you have any tangible assets, your Lender is unlikely to approve the SHORT SALE, in fact, more and more, Lenders are asking homeowners to contribute cash prior to approving the SHORT SALE.

In closing, if you think the ship is sinking, contact your REALTOR. You can look to your REALTOR for guidance and counsel to the extent they are able to provide it, but as of today, it’s looking like a SHORT SALE is way ahead in the picture… Let’s discuss your particulars. As I am only licensed in the State of California, I can only discuss particulars affecting California Real Estate and the associated laws and practices particular to same. Contact info is available by clicking the link to my website http://RogerASullivan.mywindermere.com Keep the faith!