Homeowners facing foreclosure have a number of options, one of which is doing a short sale. Some people, depending on their situation, may allow a property to go into foreclosure instead of attempting a short sale. One reason is they don't have any expectations of saving the property so walking away is an easy solution. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes. The primary consideration above all is the affect both can have on your credit score.
The Basics Of A Short Sale
The concept of a short sale is fairly simple. A short sale occurs when the sale proceeds of a property fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. A few words of warning are in order. Not every lender will negotiate a short sale. If for example your payments are current, yet you foresee imminent cash flow problems arising that will affect your ability to make your monthly mortgage payment. Lenders may not negotiate unless your payments are several months late or your need to sell is due to relocation. Another consideration is you may be held liable for taxes on the difference between the sale amount and the original loan amount. If the property is your primary residence the tax liability for the mortgage forgiveness may be waived. Short sales require nerves of steel.
The Credit Affects
Foreclosure
Without a doubt sellers will incur more damage on their credit report by going through foreclosure. Typically your credit score will take plunge between 200 to 300 points.
Short Sale
Short sales have a far less damaging affect on a seller's credit report. Credit scores typically lose between 100 to 150 points. What happens to your credit down the road? It is takes around three years after a foreclosure before a lender will offer a sensible interest rate, whereas for a person who went through a short sale typically waits around 18 to 24 months to buy another home at a good interest rate.
Salvaging your credit should always be the primary concern when making the decision between a short sale and foreclosure.
Sergio Rebollo
Miami Short Sale Specialist
Real Estate TeamMates
www.SergioRebollo.com
Mortgage Assistance Relief Services Disclosure
Real Estate TeamMates assumes no responsibility nor guarantees the accuracy of this information and is not engaged in the practice of law nor gives legal advice. It is strongly recommended that you seek appropriate professional counsel regarding your rights as a homeowner. Real Estate TeamMates is not associated with the government, and our services are not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage you could lose your home and damage your credit.
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