Home > Blogs > Mike Linkenauger > Short Sale Specialist Network

Benefits of a Short Sale Versus Foreclosure

By Mike Linkenauger

Services for Real Estate Pros

November 17, 2011 07:36 AM

Benefits of a Short Sale vs. Foreclosure
Stressed

For homeowners trapped in the unfortunate situation of having to choose between a short sale vs. foreclosure, it may feel like being trapped between a rock and a hard place. This is very understandable for the homeowner facing foreclosure; it appears to be an end to a broad canvas of hopes and dreams.

The homeowner, or homeowners, may have seen themselves growing old in the very house they’re now losing. Perhaps they imagined starting their family there or imagined one day standing on that beautiful front porch as they waved good bye to their grown up kids. Maybe they viewed it as the key to their financial independence – a tool to build equity. Faced with the decision between a foreclosure vs. short sale, it’s easy to see how a homeowner who had their life and dreams wrapped up in a house would have difficulty saying goodbye. To that homeowner, losing that house is like slamming a door shut on the life they dreamed of.

While it may be difficult for the homeowner to see at first, a closer look at these two choices reveals an uplifting truth – that one of these options doesn’t actually involve closing the door on one’s dreams of home ownership and financial prosperity. Perhaps it can be better seen as a temporary setback, a small bump in the road towards the rewards of home ownership. A short sale can even be seen as a fresh start. It allows you to stop foreclosure and relieve the stress associated with it, eliminate your over sized mortgage payments, stop additional damage to your credit, and start over again. Most homeowner's would be amazed at how fast they get back on their feet once the stress and burden of making enormous mortgage payments on a house worth half of that mortgage, is gone.

Benefits of a Short Sale

1. A Short Sale gives you a fresh start

Choosing a Real Estate short sale can in many cases stop foreclosure in its tracks. While missed mortgage payments may have already done some damage to both your psyche and your credit, why choose to prolong the inevitable? A short sale not only allows you a quick path to a fresh start, it also carries with it numerous other benefits, which will be discussed below.

2. A Real Estate Short Sale will do far less damage to your credit

As was previously mentioned, once you’re at the point of choosing between foreclosures vs. short sale, you’ve likely missed a few mortgage payments and had a foreclosure filed. This in itself has caused an impact to your credit. However, allowing the foreclosure to complete will have further negative ramifications on your credit score, particularly when you can be evicted and your house is repossessed. A short sale on the other hand, allows you to avoid the negative implications associated with foreclosures and will reflect a settled or paid as negotiated on your credit history. This is obviously the desirable alternative.

3. A foreclosure is public

Word of a foreclosed property gets around quick due to its public nature. Your neighbors will see the eviction notice on your home and your house being put up for public auction due to foreclosure. For distressed homeowners, this public spectacle can be a major humiliation on top of what is already an unfortunate situation. With a short sale, the house is listed on the market quietly and with dignity, just like any other listing.

4. You will more than likely be able to stay in your home until the Short Sale concludes.

During the short sale process, which may take up to a year to complete, you will typically be able to continue living in your home until the short sale has completed, and doing so, you should be saving for your next move.

5. You can become a homeowner again much sooner

A foreclosure can be a major setback to your dream of home ownership, with a waiting period of between 5 to 7 years before you can attempt to buy a house again. For those who want to buy a house after a short sale, you are eligible to qualify to buy another home in only 2 years after your short sale

6. Short Sale costs you nothing

A short sale does not cost you anything. Your lender will cover the costs of selling your house, including Realtor commissions, attorney fees, as well as title insurance. It bears mentioning that a foreclosure doesn’t directly cost you anything either – it just comes with a more negative consequences that will cost you in the long run. So when the beneficial choice costs nothing and the alternative carries a number of negative short term and long term consequences, the decision between a short sale vs. foreclosure should be a simple one. Not to mention, upon a successful completion of the short sale, you could qualify through the Home Affordable Foreclosure Alternative (HAFA) Program. In this program, the homeowner can receive $3,000.00 CASH BACK towards their relocation! In some cases, there can also be additional lender incentives to as much as $30,000 to complete a short sale.

How to take advantage of the benefits of a Short Sale

Benefits of a short sale

While a foreclosure requires no action, taking advantage of short sale benefits requires experienced and skilled representation. Except in some states, a lender is not legally obligated to release a borrower from paying for any deficiencies between the selling price of their home and the loan. This means that unless you can convince your mortgage lender otherwise, you’ll still be stuck with a huge amount of debt after you sell your house in many cases. This is where choosing the right agent can make a world of difference.

A Realtor specializing in short sales has the experience and the expertise to represent you in short sale negotiations and present the right Real Estate short sale package to your lender, convincing your lender to accept less than the full amount of the initial loan and allowing you take advantage of the benefits of a short sale. Enjoy a fresh start, and get back to enjoying life and working towards your dreams. Our wide ranges of highly experienced Short Sale Realtors are looking forward to getting to know you and help get you through your successful short sale! Contact us now!

Re-Blog

Comments(6)

Comment

Show All Comments

Sort:

Linda S. Cefalu, Broker Assoc.

Coldwell Banker Homesale Realty - Hales Corners, WI

I'll Take You Home

Mike,

I was just about to send your link to my clients until I came to the paragraph where it states that short sales cost you nothing. I have always been very successful with my short sales as I was with this last one. However, the kink was that the PMI company was asking for a $25,000 promissory note to be paid at $200.00 per month, no interest until paid in full. This was in response to the over $100,000 loss they were willing to accept on this property.

My sellers would have nothing to do with it. They told me they would choose foreclosure before giving the bank one dime. I tried over and over to get them to understand the ramifications of their decision and I also directed them to speak with their attorney. I am very concerned about Mrs. Seller, as she is in a profession where she needs security clearance. Even after speaking to their attorney, they are insisting on going forward with the foreclosure. I attempted one final plea to the bank and they will not budge either.

A sad day and a great loss for all involved.

Nov 18, 2011 02:45 AM

Mike Linkenauger

Jacksonville, FL

Short Sale Specialist Network

That is not a charge to the borrower for anything related to the short sale of the property. That is simply a mortgage insurance company making a feeble attempt to recoup some of their losses. A good, experienced short sale agent could have explained that that money is NOT the borrowers bank asking for money either, but is simply unsecured debt. Debt that is many times not even collected on, and in the WORSE CASE, settled for 10-20 cents on the dollar. Hopefully someone explained this truth to the seller and we don't have another foreclosure coming on the market. Agents should explain IN ADVANCE this possibility to their sellers to avoid this kind of stuff.

But again, an MI company asking for a prom note is NOT a charge, fee, or cost to the seller. After all, if it were, wouldn't it be on the HUD???

Nov 18, 2011 02:56 AM

Linda S. Cefalu, Broker Assoc.

Coldwell Banker Homesale Realty - Hales Corners, WI

I'll Take You Home

Yes, Mike,

This was explained in great detail to the seller prior to listing in addition to every possible scenario. I believe we are getting into symantics here and I did not intend to be argumentative with you. I think this is a great post and I wish all distressed property sellers would read it. But, the bottom line is after exhausting all possibilities, the MI company refuses to budge and they are moving forward with the foreclosure. Whether or not the debt is collected is a dead issue if the seller refuses to sign the promissory note.

I have worked tirelessly through negotiations with the MI company to attempt to at least get it lowered, but they are not budging either. And by the way, I am an excellent, experienced distressed property agent and I pride myself on what I have accomplished. This is a first for me.

p.s. Any help you could offer would be greatly appreciated as we are in the ninth hour.

Nov 18, 2011 03:24 AM

Anonymous

Margaret Amador

I agree that a short sale is the preferred option in many cases. It depends on the state the property is located in but in Florida it definitely is unless you are declaring bankruptcy (BK). Even then it might be better to do a short sale first and then declare BK. That way should the lender not forgive a deficiency you can get rid of it in BK. Not being an attorney this is not legal advice just passing on practical experience as a Realtor.

Nov 18, 2011 06:56 AM

Anonymous

Ronda Densford

In Florida, the decision should be fairly easy. It's my understanding from second hand info and from what the Florida Realtors Assoc has said, Bank of America and several other lenders here are offering up to $20,000 to any seller that agrees to do a short sale. It's the modern day version of "cash for keys". It seems to be helping. An agent told me earlier this week that Chase is also participating with cash-for-keys AND they released the deficiency. I agree with you. The MI is typically bluffing. I've heard that Wells Fargo is offering the same cash-for-keys in Florida. This "test" ends November 30th so sellers need to take advantage FAST!

Good luck with the process Margaret. Sounds like you did everything you could.

P.S. Mike, I think I've shown a few of your listings! :-)

Take care.

Ronda

Nov 18, 2011 02:49 PM

Anthony Lamacchia

Lamacchia Realty, Inc. - Watertown, MA

Mike this is a great piece that you put out. (It is very similar to what we preach on our site in text and with our videos. Our site is www.ShortSaleNE.com for anyone who wants to check it out.)

I agree with you on your points about the Short Sale costing the seller nothing. We get these questions from clients once in a while.

One came up the other day because they had not paid their water bill in about a year so they owed about $2,400 and given their financial situation they could afford to pay it so the bank refused to.

They said, “I thought this would cost me nothing” I said “It is costing you nothing other than YOUR water bill…keep in mind you have not paid your mortgage in a year.” He understood, agreed and paid it.

I just became a member and I am happy to be one. We are up here right outside of Boston doing Short Sales all over Massachusetts, Southern New Hampshire and some in Rhode Island. We are closing about 30 Short Sales per month.

Nov 21, 2011 12:43 AM