Short Sale or Foreclosure in Wenatchee?

By
Mortgage and Lending with American Pacific Mortgage, Equal Housing Opportunity NMLS 101328/1850

I took a Credit Reporting and Credit Scoring class today and wanted to pass along the information I received. It was brought up by Lenders and Real Estate Agents alike that home owners in financial distress were unaware of the consequences of choosing to short sale or go to foreclosure on their homes. Knowing the difference between a short sale and foreclosure could affect their ability to purchase a home in the near future. Knowledge is power!!!

First of all let’s discuss the difference between a short sale or foreclosure. A short sale is a transaction where the owner of the property has permission from their mortgage lender to sell the home for less than the home owner owes on the property. A foreclosure is when the owner of the property quits making mortgage payments and the mortgage lender goes through the legal process of taking the home back. Either way the home owner walks away from their home.

As a home owner has to decide which option to choose it is important that they understand how either a short sale or a foreclosure affects the homeowners’ credit? Before agreeing to a short sale the home owner should contact the lender and ask at least these two questions. How are you going to report the short sale to the credit bureaus? And, are you going to require a promissory note?

The answer to the first question will most likely be a short sale will be reported as not paid in full, either settled or paid less than agreed, in which case it would affect the credit the same as a foreclosure.

The answer to the second question in Washington State will most likely be, if the current loan was a purchase transaction then there can be no promissory note, but if the current loan was a refinance there may be a promissory note required. Meaning the home owner would be responsible for the difference between the sales price and the loan amount. Also, the home owner may be responsible for capital gains on the property.

So my thoughts are that before a homeowner decides on a short sale or a foreclosure, they should contact an Attorney and an Accountant that focuses on real estate. Make sure you know the benefits and the down side of your options. That way there are no surprises later on. Your financial future depends on knowing the facts and making the right decision for your individual circumstances.

If you need help finding an Attorney or an Accountant give me a call at (509) 888-6700.

 

Posted by

 

 

 

Comments (3)

KAREN THOMPSON, GRI, REALTOR
KTHOMES, LLC - Frederick, CO
Colorado Homebuyer Pro

I totally agree that the homeowner should contact a real estate attorney and an accountant.  Trouble is, homeowners in this type of difficulty have no money to make their house payment, let along scrape up some money for an attorney or an accountant.

Sep 13, 2011 01:38 PM
Anonymous
Janice L Brown

Exactly...and if they do not contact an attorney and an accountant they may not be able to buy another home for a lot longer than if they had. Especially if they get hit with a promissory note or capital gains. Also, there are agencies that work with clients who have little or no funds.

Sep 14, 2011 04:21 AM
#2
Donald Hester
NCW Home Inspections, LLC - Wenatchee, WA
NCW Home Inspections, LLC

Janice,

Good information. These are tough times for many and making good decision can be difficult when under this kind of pressure.

Sep 30, 2011 04:55 PM