Short Sale vs. Foreclosure

First off, let this be clear…if you are wishing to avoid foreclosure by doing a short sale, please know that you must work with a real estate agent that knows what he or she is doing! Many agents don’t have a clue how to conduct a successful short sale transaction. Do not let an agent without successful short sale experience take your listing, as you will most likely waste precious time!

Here at Elizabeth Real Estate Co., LLC, we are short sale experts and know exactly how to conduct a successful transaction. We have the experience and education to help you avoid a foreclosure through a successful short sale.

As of 1/1/2010, nearly 15% of all home owners were not making their mortgage payments. With foreclosures on the rise and more adjustable rate mortgages getting ready to increase yet again, not to mention our nation’s high unemployment rate, unfortunately foreclosures are not going anywhere anytime soon.

So what if you are in a situation where you simply are bleeding from the seems and cannot make your mortgage payments any longer? You may have lost a job, taken a significant decrease in pay, had unexpected medical bills to deal with, etc.

Should you do nothing and hope that your lender doesn’t notice? Should you do nothing and just let your lender foreclose? The answer to both of these questions is a resounding NO!

If you have fallen behind in your mortgage payments or simply cannot make another one, act and act fast! Time is of the essence when you are facing default. The good news is the vast majority of lenders would much rather prefer to avoid foreclosing on home owners and are more willing to approve a short sale instead!

A short sale is when your lender agrees to accept less than what you owe on the loan. This AVOIDS a foreclosure and preserves your ability to purchase another home in the future. Your credit is negatively affected, but not to the level that a foreclosure would cause.

Buying Again After a Foreclosure

With certain restrictions, you may be eligible to buy another home in 5 years if the home was your primary residence. Without restrictions, the wait is 7 years.

If you are an investor and do not occupy the home, the wait to buy with a Fannie Mae insured loan is 7 years.

Affects on Credit After a Short Sale

A short sale is not a derogatory mark on your credit because credit bureaus do not show the word “short sale” on your credit report. It may say “pay as agreed” or “paid as less than agreed,” among other categories. Some clients have reported negative FICO score drops from 50 points to 130 points.

The point drop is typically due to being in default; being behind on your payments.

Affects on Credit After a Foreclosure

A number of sources have reported FICO score drops from 200 to 400 points after a foreclosure. Generally this credit score will remain on your credit report as a public record for 10 years.

Credit Reports After a Short Sale

All lenders report short sales differently and some do not report them to the credit bureaus at all.

Credit Reports After a Foreclosure

If a prospective employer runs a credit check on you, your job application may be denied if you have a foreclosure on your record.

Loan Application Questions After a Short Sale

Loan applications do not ask questions about a short sale. You may report that you sold your home.

Loan Application Questions After a Foreclosure

You are required to answer the question: “Have you ever had a property foreclosed upon or given a deed-in-lieu thereof in the past 7 years.” If the bank sees you have had a foreclosure, your loan most likely will be denied. If you lie, you may be subject to investigation by the FBI for mortgage fraud.

The bottom line is a short sale is a far better option for all home owners!

Elizabeth Real Estate Co.’s agents are short sale experts and have successfully helped many home owners avoid foreclosure and preserve their ability to purchase another home in a relatively short time. We are here to help you if you are in this position. Don’t be embarrassed…pick up the phone and call us now. We can help!