Foreclosures
FROM THE COLDWELL BANKER TOWN & COUNTRY BLOG
FROM THE COLDWELL BANKER TOWN & COUNTRY BLOG
(For Other Entries Go To
February 6th 2010
FORECLOSURE OR SHORT SALE? WHAT ARE MY OPTIONS?
Our clients know what "foreclosure" means: bank takes your home and you leave. In short payoff (the correct term for "short sale"), a buyer is found for your home and your real estate pro negotiates with your lender (or lenders, plural!) until an agreement is reached to accept the amount offered by the buyer; and, of course, you have to leave then too.
Increasingly, our Associates are asked about the pluses and minuses of waiting for a lender to foreclose on a distressed property as opposed to trying to achieve a "short
pay-off" with that same lender. Here are our brief answers to those famous FAQs:
WITH FORECLOSURE WITH SHORT PAY-OFF
The Process The Process
You aren't paying your mortgage, you You aren't paying mortgage, you
get a notice of default from your bank. get a notice of default from your bank
You just wait around for a few months You list your property with a real estate
and after five to eight months, the bank agent, solicit buyers for your home; when
forecloses and evicts you. an offer is accepted, it is sent to the bank.
after several weeks or months, the bank will respond, usually accepting the offer
(with some conditions).
The Results The Results
Your credit score Your credit score
That famous FICO score will really take Your FICO score will suffer some damage
a hit. Several hundred points at the of course. But that will result from the
very least. It will be a factor in other the missed payments and most banks will
purchases (cars, etc.) for at least three enter "Paid as Agreed" on your credit
years. In addition, the "Foreclosed" history. You will have "credit issues" for
term will show on your credit history a year or a year-and-half (cars, etc.), but
for up to 10 years. no term like "Short Payoff" will show on
credit histories.
Buying your next home Buying your next home
As the rules are presently written, In general, if you are successful in your
it will be five years before you can short sale efforts, it appears that you will
obtain a federally insured loan able to get a new loan in about two years.
(Fannie Mae or Freddie Mac). If No promises, of course, but that's how
you are an investor, it will be seven! your chances look at this writing.
Will you still owe money to the bank? Will you still owe money to your bank?
You can, unless your loan was for It is possible but unlikely. If you bought or
purchase money only, not a credit line. refinanced your home in part with a line of
you can escape. Most second loans from credit (a HELOC) you will probably be able
the early 2000s were credit lines and not negotiate a settlement of that and be free from
true mortgage money. You can be liable! Any future obligation for the line of credit loan.
