THINKING SHORT SALE? … THE LONG TERM CONSEQUENCES

Think a “short sale” is a pain now?  That’s just the beginning.  It gets worse.  If you or someone you know is considering a short sale, it probably is best to pursue every possible creative alternative, such as family help, bartaring your time to friends for their help, or sell you big boy toys.  Here is why:

When your mortgage lender agrees to a short sale, they are not necessarily agreeing to forgive your debt.  Perhaps the opposite.  They may simply be agreeing to a well-planned new stance for themselves in which they have even more leverage to force you to pay on the balance of your loan agreement.  That is, they may craftily use the short-sale “negotiation” with you to shift from an assured non-payment today, to a more likely partial payment years later. 

According to this article by Jim Wasserman, “lenders have been quietly selling second mortgages and home equity lines left unpaid after foreclosures and short sales. The buyers: collection agencies, which in some states have years to make a claim. If they win court judgments, these collectors could have years to pursue borrowers with repayment plans, and even garnish their wages.”  According to Scott CoBen of Sacramento, “Just when you think you’re back on your feet, you’re making money and the economy’s good, they hit you with this.”

“Most people are so stressed out and exhausted by trying to save their homes today that they are unaware they could face another hit later,” quoting Sylvia Alayon of the Consumer Mortgage Audit Center, in the same article cited above.

So what should we conclude from this?  A lot.  Walking away from a mortgage loan foreclosure, or a short sale, could be a much larger (and longer) hit than just a damaged credit rating for the next year or so.  It could damage your future take home pay, having the same economic effect as a permanent job demotion for perhaps the rest of your life.

I believe the moral to this story is, if there is just about any alternative to a formal short sale or foreclosure, it is very possibly a much better alternative.

For more information on this topic contact me, Lee Alley, where anyone can get an hour of expert real estate consulting on any topic for free, with no obligation and no follow up hassles.

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