Foreclosure Vs. Short Sale
If you are in foreclosure, or not, if you cannot sell your home for enough to satisfy your existing mortgage, you may want to consider selling on a short sale. Times have changed!Although going through foreclosure is often painful and embarrassing for sellers, there are benefits:
Drawbacks to Foreclosure
- No mortgage payments to make.
- Foreclosure proceedings take months to conclude.
- The home is still yours until the foreclosure is final.
- No strangers are traipsing through your home.
- Banks sometimes give cash for keys after the public sale.
Few people, apart from the sellers who choose to buy and bail, really want to experience a foreclosure. Memories are made in a home, and losing it can shatter future dreams. Here are other drawbacks to foreclosures:
Benefits for Short Sale
- The right of home ownership is striped away.
- Homeowners return to the rental market as a renter.
- The bank may post a Notice of Public Sale on your front door.
- Your credit takes a nose dive, and a foreclosure will remain on your credit report for 10 years.
- Under Fannie Mae guidelines, without extenuating circumstances, you will not be eligible to buy another home for 7 years.
Of course, you will make your real estate agent happy because agents are happy to take listings. But what about you? What do you get out of a short sale?
Drawbacks to a Short Sale
- Retain some dignity in knowing that you sold your home.
- You won't suffer the social stigma of the "F" word: foreclosure.
- No mortgage payments to make, unless you choose to make them.
- You can meet the new owners.
- You will be eligible, under Fannie Mae guidelines, to buy another home in 2 years instead of 5 to 7 years.
- If your credit report does not reflect a 60-day+ late pay, under Fannie Mae guidelines, you will be eligible to buy another home immediately.
You may experience some of the same drawbacks as a foreclosure, but they might seem less intense.
- Waiting for the bank to respond to an offer is frustrating.
- The bank will want to examine personal records such as tax returns, bank accounts, assets and liabilities, in addition to asking for a hardship letter from you.
- Accommodating buyers will mean keeping your home in spotless condition for weeks or months until an offer is received and putting up with traffic through your home.
- There is no assurance the bank will accept a short sale offer.
- The derogatory credit will remain on your credit report for 7 years.
For many sellers, though, the chance to buy another home in two years is the real motivation to do a short sale. Good credit behavior can supplant bad credit after two years, even though the derogatory will remain.
For documentation on short sales, the short sale process, and the foreclosure process in Los Angeles County, contact me.Kieran Jackson, Realtor, SFR
NAR certified Short sale Foreclosure Resource
KieranJackson@kw.comI am not licensed to give legal/tax advice.This information is from an article by Elizabeth Weintraub, About.com Guide