"I'm not sure if a short sale is for me......maybe I should just let the home foreclose"
1. A short sale is better than a foreclosure.
* You will be able to borrow and buy again sooner. Lenders have longer waiting periods for those with foreclosure on their records. Settled loans indicate to a creditor you were cooperative and worked out a solution.
* Employers often run credit checks prior to hiring employees. You could be turned down for a job in favor of someone with stellar credit.
* Foreclosures can affect those with security sensitive employment (such as security officers, police, military or govt workers).
* Foreclosure can have drastic effects on your FICO score (anywhere from 250-300 pts) and can last on your credit report 7 years. Short sale effects can be over in as little as 12-18 months and will read "settled for less than owed" or "paid as negotiated" on your report. If payments are kept current the FICO score drop can be as little as 50 points.
2. You don't have to make payments during the shot sale process. Living through a financial hardship is not easy. During the short sale process you can take advantage of a few months of living in your home "rent-free" if you choose. These few months can help you save for a rental deposit or pay off other financial obligations. Short sales can take 3-6 months on average. Being deliquent does not hurt the process. The bank prefers the borrower continue to occupy and maintain the home until closing.
3. Rent the same house for less than your current mortgage. In Arizona we have had such a drastic drop in home values that in most places you could rent your same home for much less than your current monthly mortgage..... and with prices likely to stay the same or near today's current prices, you could reemerge as a buyer in 2 years and pay much less than you originally paid during the 'boom'.
4. A Short Sale is Free to do. At RE Options we list you home, obtain an offer, negotiate your short sale and close your home with no fees or out-of-pocket cost -we never charge any fees to the homeowner. Our commission is paid out of the bank's net proceeds.
We don't stop there. We are dedicated to helping you buy again in as little time as possible. We even have options for buying during or right after short sales. Or we can help you find a great rental home.
5. Settle your loan(s) in full. We are very successful and experienced at settling loans in full at closing. This means, we obtain approval letters from your bank that specifically state your bank will give up all future rights to the definciency balance. We also negotiate settlements and/or lien releases on recourse loans such as HELOCS, 2nd loans, IRS tax liens and other judgments attached to the property. (*some recourse loans may require a small percentage of the total principle amount to be paid by the borrower as settlement)
Heard you would owe taxes if you did a short sale? The Debt Forgiveness Act of 2007 allows homes that were used as primary residences for at least 2 of the past 5 years to be exempt from paying 1099-C taxes. This means you would have NO tax liabilty for undergoing a short sale on your primary residence. BUT...this act expires Dec 2012 and at this time there is no plan for an extension. If you are considering a short sale you may want to get started early 2012 to assure a closing by the Dec 2012 deadline.
6. Get back on your feet and/or change the course of your financial future forever. Many homeowners have immediate financial hardships (due to loss of job or medical bills, etc.) but there are also homeowners who hold onto their homes waiting for the market to come back so they can sell. They can make their payments but are dipping into savings to do it. Let's be realistic and say we probably will not see 2005-2007 prices in a really long time. ...maybe 20+ years from now? This wasn't just a bump in our economy...it was a complete reset. You may need to reset your financial path as well. Knowing that it could be several years before you are able to sell, consider how keeping your home may effect plans for retirement or saving for college or other major life expenses.
7. Short sales are better for our community. Foreclosures weaken our community and our country. When a house is left to foreclose it often sits unattended and deteriorating for months. When it does sell, it often sells for 10-15% less than comparable regular and short sale listings. This further depreciates the market value of all homes in the community and prolongs economic recovery for everyone.
If you or someone you know is having trouble making mortgage payments (or may in the future) call me and let's go over some options. You might be surprised at how easy it is to turn your financial situation around and get back on track.
RE Options brokers are Certified Distressed Property Experts, hold the Certified Short Sale Professional designation and close 95%+ of our short sales.