Short Sale Verses Foreclosure
Many troubled homeowners do not completely understand the benefits associated with completing a short sale verse allowing the bank to take the home by foreclose. In the vast majority of situations, the relief provided by completing a short sale is substantial and clearly provides a sound alternative to foreclosure.
A typical short sale is less damaging to a Seller's credit than a foreclosure of Deed-in-Lieu. While a foreclosure can often carry a negative impact of between 200 and 300 points, a short sale historically results in a loss of between 100 to 200 points on a credit report. Much has to do with the Seller's non-mortgage related debt and the extent of the mortgage late payments prior to the short sale being completed.
Additionally, a foreclosure will appear on a credit report for 7 years. Any attempt by the borrower to obtain credit in the future will require a detailed explanation of the event and could automatically provide a decline to extend credit based on the derogatory report.
Balance owed after the sale:
The unpaid balance owed following the short sale or foreclosure is commonly called the "deficiency balance". In a short sale transaction, the deficiency balance remaining after the sale is typically forgiven, A loan currently owned by Fannie Mae, Freddie Mac, FHA, USDA or VA will provide a complete waiver of any remaining debt owed after the sale. Many private lenders now also follow agency guidelines and provide written waivers as part of the short sale approval. To a homeowner, this means that they can move on with their lives without the fear of future collection of the unpaid loan balance.
Both New Hampshire and Massachusetts are redemption States, therefore, following a foreclosure the lender has the ability to recover the loss for up to 20 years. Imagine the realization of a homeowner who many years later has been able to rebuild credit, purchases a home and then realize that they must now come to terms with repayment of the former debt.
Cash payment incentives:
Depending on the individual Investor, many homeowners may be eligible to receive a cash payment or seller incentive at time of closing for completing a short sale. The typical allocated cash payment is between $750.00 and $10,000.
Purchasing a new home:
Current guidelines are subject to change however a homeowner who completes a short sale and has demonstrated the ability to rebuild and maintain credit since the short sale can be eligible to purchase a new home in as little as 12 months. A foreclosure will typically preclude a prospective homeowner from being able to purchase a home for some 7 years, or longer.
In many cases the ability for a homeowner to "sell" their home and avoid foreclosure will provide a feeling of closure to a trouble time in their lives. Avoiding the public auction of the home with neighbors and potential buyers waiting and watching can be very upsetting to the family.
The short sale allows the homeowner sufficient time to market, sell and relocate as is typical in a traditional home sale. Together with the forgiveness of a resulting deficiency the homeowner now has a clear path to reconstructing future home ownership goals.
We would be pleased to refer a Preferred Short Sale Listing Realtor who will be familiar with housing values in your neighborhood. Our partner Agents are all experienced in handling short sale listings and are part of an expert team of financial and legal professionals available to assist at No Cost to you.
For additional information or to answer any questions or concerns, please feel free to contact me directly by phone or email.