The consequences of foreclosing on a home affect more than just the homeowner. The effects are felt by the entire family, the community, the housing market and the economy. An alternative option, a short sale, provides one way for troubled homeowners to prevent foreclosure and most of the related penalties.
What is a short sale?
A short sale is an agreement between the homeowners and their mortgage lender where the lender agrees to accept a payoff on the loan for less than the outstanding balance. Many lenders agree to accept a short sale because they receive more of the outstanding balance than they would gain from selling the property following a foreclosure.
Why are short sales better than foreclosures?
The short sale process aids in maintaining home values in the community and helps the homeowners maintain a better credit level when compared to the backlash of a foreclosure.
Can any homeowner opt for a short sale?
In most instances, homeowners must qualify by meeting specific criteria. You may qualify if you:
–are behind in your mortgage payments
–provide evidence of economic hardship
–have little or no equity in the property
Is a short sale just another typical real estate transaction?
No. A short sale is not a typical real estate transaction. In addition to the parties involved in a typical real estate transaction (seller, listing agent, buyer, buyers agent, and lender), the homeowner’s loan servicer, any junior lien holders, and various other parties are involved which substantially slows down the process of selling and buying a home. The process can be difficult to complete without an experienced liaison who knows their way through the transaction and can expedite the short sale process.
Who decides if my home should undergo a foreclosure or a short sale?
It is your lender’s decision to accept a short sale or to pursue a foreclosure. The most important aspect in getting your lender to agree to a short sale is to prove that you have no other way to pay the mortgage. Your lender will want to minimize loss and recoup as much as possible from your home. Most lenders will not accept less than the fair market value for the property. If the lenders believe they can receive more by taking possession of the home in a foreclosure and selling it themselves, they will not agree to accept a short sale.
How long will I have to wait to buy another home?
Fannie Mae backed mortgages will be available to buyers two years following a short sale and five years following a foreclosure.
What’s The First Step?
Well, first and foremost, contact your lender. It is important to show your intent to resolve the matter and satisfy the loan balance on your home to the best of your abilities.
Secondly, contact David Brenton’s Team, an attorney and accountant. If you do not have an attorney or accountant, we can supply referrals. We want to be your ally through this arduous process – offering our guidance, recommendations and experience to help you maneuver the uncertain terrain ahead.
Avoid Foreclosure: Work with Certified Distressed Property Experts
David Brenton’s Team is committed to helping you avoid foreclosure. David Brenton and his Team have undergone extensive training to become Certified Distressed Property Experts, which means that they have been trained on the necessary steps to assist a homeowner coordinate a plan to avoid foreclosure.
Unfortunately, seven out of ten homeowners in foreclosure proceed without the assistance or advice of real estate professionals. Now more than ever, you need to find an advocate for you and your family’s interest, one who is prepared to handle your specific needs.
Real estate professionals with the Certified Distressed Property Expert ® (CDPE) Designation have trained extensively to understand the options, solutions, and effective methods for dealing with homeowners facing hardships. Don’t risk your financial future and the potential sale of your home with an agent who does not have all the solutions.
If you are struggling with your mortgage or have questions about short sales, foreclosures or loan modification, please contact David Brenton’s Team today.
Foreclosure vs. Short Sale: How It Affects the Homeowner
If you are wondering whether you should opt for a short sale or foreclosure, take a look at the differences in how each will affect you as the homeowner with the following issues:
Security Clearances- A successful short sale does not challenge most security clearances. A foreclosure, however, is the most challenging issue against a security clearance besides that of a conviction of a serious misdemeanor or felony. If the homeowner is a police officer, in the CIA, military or other positions where having a security clearance is required, in just about every case it will be revoked and their job will be terminated.
Current and Future Employment- As employers have the legal right to continuously check the credit of all employees in sensitive positions on a regular basis, in many cases a foreclosure will be grounds for reassignment or termination; because future employers will also have the right to check your credit history this may also make it difficult to change jobs. A short sale, on the other hand, will not be a challenge to your employment—current or future—as it is not reported on a credit report.
Credit Score and Credit History- A foreclosure will remain on public record for 10 years or more on an individual’s credit history, unlike a successful short sale which is not recorded on credit history. In addition, your credit score after a foreclosure may be lowered, typically from 250 to over 300 points and affect your score for over 3 years; a short sale may only lower your score as little as 50 points, with only late payments on your mortgage showing up. A short sale’s effect may be as short-lived as 12 to 18 months.