Although Frank D'Angelo of Coon Rapids, MN writes a MInnesota and short sales here on the gulf coast of Pensacola, Pace and Gulf Breeze. sellers could use this great informational post to come to there own conclusions as well. Short sales have become the norm here in Pensacola, Pace and Gulf Breeze and no longer carries the stigma that it carried just a few years ago. A seller would be wise to call me and get their complete options and make the right decision for theirselves.
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Courtesy of Charles Stallions, Pensacola Homes for sale – Pensacola Short Sale and Investment Expert
Effects of Foreclosure in Minnesota vs Short Sales
Minnesota is one of few redemption states in the USA and understanding Foreclosure in Minnesota involves the following:
- Credit Score impact. This is probably the most significant impact on the borrowers credit reporting and future credit possiblities. Scores have been impacted by as much as 300 points in some cases.
- A reported foreclosure on a credit report is usually a permanent mark on the borrowers credit report and almost impossible to have it removed.
- Future mortgage applications will greatly impact approval and/or future mortgage rates available to the borrower when the lender associates the previous foreclosure with the new mortgage application.
- More employers are conducting credit checks and a foreclosure may jeopardized employment options.
- Junior Lien holders may seek to re-capture deficiency judgements against the borrower.
- Owner-Occupants must find a new place to live.
For a complete analysis on How to Avoid Foreclosure, click here please.
What is a Short Sale and why is it one of the best options?
Foreclosures have more negative consequences on the borrower, their families and the communities associated with the properities under duress. The option of the Short Sale provides better solutions for the borrower and the neighboring housing community.
A Short Sale is a basic agreement that is constructed between the borrower, their Short Sale REALTOR® and their lender or servicing company to accept an acceptable payoff on the loan for less than what is owning on the balance. More and more lenders have realized over the years that receiving a short payoff on an approved Short Sale is much more profitable than retaining the property and selling it after foreclosure. This also helps in retaining the highest and best values within the communities with respect to home values.
A Short Sale is a specialized real estate transaction. Therefore, aligning yourself with an experienced Short Sale REALTOR® is fundamentally important to act as a qualified liaison amongst the potential parties involved in approving the short payoff. Those parties may include: Multiple Lien Holders/lenders, servicing arms/companies, housing counselor, mortgage investor, insurers and potentially an asset manager. An experienced Short Sale REALTOR® can help the borrower sort through the necessary details in obtaining the short sale agreement, closing the transaction for the borrower and providing the guidance to obtain the necessary tax experts and/or services of an attorney to further help protect their rights and any future judgements or claims against the borrower. Contact us today for a FREE Consultation!
Short Sale vs Foreclosure! There are differences on how they impact you!
- Credit Score Implications: As mentioned earlier, after a foreclosure one's credit score can be impacted by as much as 300 points and usually 250 points at a minimum. A successfully negotiated Short Sale can have reduced credit score implications of 50 points and may only impact the borrower for 12 to 18 months versus the years associated with a foreclosure.
- Credit History Implications: Foreclosures usually remain on the borrowers credit history for at least 10 years and remains on public record as well. However, a successfully negotiated Short Sale is reported on the borrowers credit reports as paid in full.
- Future Home Purchase Options: After a complete foreclosure, the borrower may have to wait up to 72 months before a lender may consider an acceptable rate (potentially much higher than normal). However, most mortgage lenders are now reporting that homeowners who have experienced a Short Sale may get a reasonable interest rate and qualify in less than two years. In fact, Fannie Mae guidelines are now allowing a short sale seller to apply for a new loan immediately after their short sale if payments were current and had no 60 day late payment on their history.
- Future Loan Implications: After a full foreclosure, the borrower will be asked on any future loan applications to declare any/all property foreclosures for up to 7 years, which will then affect their interest rate. Fannie Mae backed mortgage are not available to foreclosed borrowers for at least 5 years. However following a successful Short Sale, the borrower has access to Fannie Mae backed mortgages after two years and they are not asked to declare a short sale on any mortgage application.
- Employment Implications: Foreclosures are reported on Credit Reports, therefore employment status can be negatively implicated when employers pull credit reports. Short Sales, do not appear on Credit Reports.
- Implications of Future Deficiency Judgements: Even a successfully negotiated short sale may provide a window of opportunity for the lender or investor to purse a deficiency against the homeowner for the short fall difference. A good negotiator may be able to successfully negotiate on the borrowers behalf any future deficiencies. Should a future deficiency still be attached to the short sale, the amount is usually considerably lower because the sale price of a short sale is typically higher than bank owned REO's.
Frequently Asked Questions:
- What happens after missed mortgage payments? Lenders will call and mail the borrower with notices of default and a review of the foreclosure process. This is probably the best time to consult with an experienced Short Sale REALTOR® to review your options since you have the most available options to you early in this hardship situation.
- What happens after being served a 'Notice of Foreclosure'? Typically, this notice comes from the attorney firm representing the Lender or Servicing Company. The worst things to do in this case is abandon the property and/or do nothing. Seeking advice to explore your options becomes even more imperative at this point. Minnesota is a redemption state and a loaming foreclosure does have implications and options. Please do not hesitate to contact your attorney or simply us if you want to be aligned with an appropriate real estate attorney to seek advice on your situation.
- What happens after a Sherriff's Sale. Does the homeowner have to move? Minnesota is a redemption state, which allows the borrower to redeem their home for up to six months after the Sherriff's Sale date if the property is still occuppied. Abandoning the property provides the lender the opportunity to escalate or shorten the redemption period to as little as 5 weeks after the Sherriff's Sale date. If this event has already occurred, the borrowers rights and options change the day of the Sherriff's Sale and reviewing them with an experienced REALTOR® who handles lender mediated transactions can help the borrower, especially when the first lender/lien holder decides to significantly reduce the actual amount owning on the home by posting a sale bid at the Sherriff's sale much lower than what was originally borrowed on the loan. This is called an underbid and is occurring more frequently in Minnesota. Contact us to review your post Sherriff's Sale options. Time is of essence!
For a complete analysis on How to Avoid Foreclosure, click here please.
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