Short Sale vs Foreclosure – Should I care??
Yes, With our current economy causing difficult times for many, it can feel like there are nothing but bad choices. However, some are not as bad as others. If you are finding yourself having difficulty with keeping up with your mortgage you do have some choices. We are continuing to educate ourselves so that we can offer you the best advise available. If we do not have the answer, we have a network of professionals who can help.
Short Sale: Even if you are behind on your mortgage or don’t think you can sell your home for as much as you owe, we may still be able to help you sell your home and get out from under your loans. A short sale is when you sell your home for less than the total amount you owe the lender(s). The process can be arduous but you avoid a foreclosure and generally will face less negative consequences on your credit score. We have successfully negotiated short sales and have usually gotten the lenders to forgive the shortfall on the payoffs.
We will help you through every step of the process. The lenders generally require several years of tax returns, bank statements, and a letter explaining why the loan cannot be paid in full (a hardship letter). We will help you on each step so that we can present a complete package to the lender(s).
Foreclosure: Foreclosure is when the bank actually goes through the process with the public trustee to sell a property at auction. The process starts when the Public Trustee sends a Notice of Election and Demand. From that point it can be as little as 120 days before the property is sold at auction. Frequently the bank ends up with the property. Even if the process has started, you may still be able to sell your home – if we can get an offer, most lenders will pause (delay) the foreclosure proceedings, giving more time to complete the sale.
Foreclosure can a have significant effect on your credit score, ability to obtain loans, and even security clearances. Should you currently hold a security clearance, please try to avoid a foreclosure at all costs, losing your clearance could cost you your job.
For example:
–foreclosure will lower your credit score 250 to 300 points for 3 years while a short sale might only drop your score 50 points for 12 to 18 months (because of late payments),
–foreclosure will make a potential homeowner ineligible for some loans for 5 years while the short sale may only affect eligibility for up to 2 years.
