Hayes Realty Group

John J Hayes Always stay on "PAR" with your real estate needs Serving Sacramento, Folsom, El Dorado Hills, El Dorado County      Saturday August 19th, 2017

Contact John 530-306-3316

Foreclosure Vs Short Sale

Knowing Your Options.

A Better Alternative.
A short sale if accepted by the lender is a much better alternative than foreclosure. You will not have a damaging foreclosure mark on your credit, may not have to bring any money to closing even if your home is “underwater,” may avoid bankruptcy, not need to make any extensive repairs, and could qualify for another home in much less time than if you allowed the bank to foreclose.
**If you are facing a scheduled foreclosure date, be sure to let your agent know. Please also provide them with any paperwork sent to you regarding the foreclosure.

Issue Foreclosure Short Sale
Future Fannie Mae Loan – Primary Residence A homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years and then would be eligible. A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage only after 2 years and then will be able to purchase a property that is Fannie Mae backed investment.
Future Fannie Mae Loan – Non Primary An Investor who allows a property to go to Foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of 7 years and then would be eligible. An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years and then will be able to purchase a property that is a Fannie Mae backed investment.
Future Loan with any Mortgage Company On any future 1003 mortgage application, a prospective borrower will have to answer “YES” to question C in Section VIII that asks “Have you had a property foreclosed upon or given title or deed in lieu thereof in the last 7 years?”. This answer will affect future interest rates for up to 7 years from foreclosure. There are no similar declarations or questions regarding a short sale on the mortgage application and therefore would be no reason to disclose that information.
Credit Score Score may be lowered anywhere from 250 to over 300 points. Typically will affect score for over 3 years. Credit scores are important to qualify for a loan in the future. Only late payments on mortgage will show and after sale mortgage will be reported as paid or negotiated. This will lower the score as little as 50 points if all other payments are being made. A short sale’s affect can be a brief as 12 to 18 months and your credit could be back to normal.
Credit History Foreclosure will remain as a public record on a person’s credit history for 10 years or more and will higher chances for obtaining loans. There is no specific reporting item on a credit report for ‘short sale’. The loan is typically reported ‘paid in full, settled’. thus giving your credit report a stronger value than a foreclosure would.
Security Clearances Having a foreclosure on your record is just under having a criminal record when it comes to security clearances. Employer’s that have high security clearance have rights to dismiss employees with a foreclosure on their record. A Short Sale on its own does not challenge most security clearances. Officers in the military may be adversely affected by a short sale in certain cases.
Current Employment Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. Employer’s that have high security clearance have rights to dismiss employees with a foreclosure on their record. A short sale is not reported as such on a credit report and is therefore not a challenge to employment and not needed to be disclosed.
Future Employment If future employers do credit checks a foreclosure is the worst strike to have on a credit report. A short sale is not reported on a credit report and is therefore not a challenge to employment and no need to be disclosed.
Deficiency Judgment In 100% of foreclosures (except in those states where there is no deficiency) the bank has the right to pursue a deficiency judgment. In some successful short sales it is possible to convince the lender to give up the right to pursue a deficiency judgment against the homeowner. This happens more times than not.
Deficiency Judgment (amount) In a foreclosure the home will have to go through an REO process if it does not sell at auction. In most cases this will result in a lower sales price and longer time to sale in a declining market. This will result in a higher possible deficiency judgment. In a properly managed short sale the home is sold at a price that should be closer to fair market value and in almost all cases will be better than an REO sale resulting in a lower deficiency. Short sales homes are usually better taken care of will demand a stronger value.