How Short Sales and Foreclosure will affect people's credit in Miami market
In most Real Estate markets, specially in Miami and Fort Lauderdale, most of the people that took variable interest rates on their mortgages not too far ago, are in a not so good situation since more of these rates are adjusting right now. This will definitely will be a hole in most homeowners budget.
We also have homeowners in this Miami market where their property is worth less than what they currently owed on their mortgage. This will cause the big question for them: Should I go the foreclosure or the Short sale way in order to sell my home?
Its true and we all know that a foreclosure and a short sale will affect negatively on our credit records, but which one is the worst?
Lets take a look at both consequences: In a foreclosure, your credit may drop up to 250 points. If a property gets successfully foreclosed, and then sold at an auction in a Miami/Fort Lauderdale court and in less than what you owed, a lender can still ask the debt to be paid in what we called a deficiency judgement. With this type of judgement, the lender can also come after other assests and will definitely show on the credit report and could result in a tax lien. The amount owed could be also considered as a forgiven debt which is treated as income an you may have to pay taxes in this amount. In conclusion in a foreclosure, your credit goes from good to worse in the least amount of time.
In a short sale, If the borrower wants to sell the property, he may have an agreement with the lender to sell it a a lower price from what is owed. This is not common to show in a person's credit, and the owner may negotiate the way its reported on the credit report. This sale could be reported as a "Paid Settlement" and this will drop the credit score for 50-100 points only.
Every short sale or foreclosure should be treated in a different manner. If you need help with your short sale or Foreclosure, call me at 305-801-7347.
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