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Ron Escobar's Blog

By Ron Escobar, Broker | Agent in 90019

Short Sale Vs Foreclosure | Beverly Hills

Written by Ron Escobar

Short Sale Vs Foreclosure | Beverly Hills

One of the questions I get asked the most is how Beverly Hills short sales and foreclosures are different and why the seller should choose one over the other. There are 3 main issues to consider. 2 of them are analytical business type decisions regarding credit etc, and the other one is more of an emotional one, one of human element.

Regarding your credit, both a Beverly Hills foreclosure and a short sale are going to hurt your credit. I want to focus on more about how the Beverly Hills short sale and foreclosure are reported as opposed to focusing on what happens to the fico score. There are many debates about how a short sale affects your credit less than a foreclosure, but how much is truly not a science. I have heard credit experts state that a short sale will only hit your fico score by 50 points. I find that hard to believe. By the time your short sale is approved you will be somewhere from 4 to 6 months with no payments. That means a 30, 60, 90, 120 late payments as well as the notice of default have been filed. I think that alone will hurt your credit more than 50 points.

I don’t know why people try to tell folks that the credit is less damaged (from a numbers standpoint) with a short sale. Probably a sales tactic. The benefit is not in the Credit Score when it comes to Short Sales but the Credit History and how that is reported. That is where the true difference is.

Short Sale Vs Foreclosure | Beverly Hills |Credit Issues

The credit bureaus like Equifax, Experian and Transunion will report a short sale different than a foreclosure. Where a foreclosure is reported as such, a short sale is normally reported as paid in full for less than amount owed.

Short Sale Vs Foreclosure | The Human side of things | Beverly Hills

When you short Sale your home you show that you were responsible and took action instead of giving up and giving the middle finger to the banks. Really, that’s how it seems to them. The main reason is that the banks lose around 20% more when they have to foreclose. When you Short Sale you can buy as soon as 3 years after the completion of your short sale. It will be sooner down the road when they realize that they need to sell homes to people who were once homeowners to get rid of all the homes on the market.

It is going to get to the point where more than 50% of the homeowners nationwide have either had to short sale their home or were foreclosed on. There will be programs for folks who used a short sale to purchase right away down the road. There is no way all of those affected can be kept out of the marketplace and think we will see any type of recovery.

Short Sale vs Foreclosure | Don’t be foreclosed on! | Beverly Hills

Did you notice just above I said “Foreclosed on?” I wanted to point out here that that is exactly what happens. You are not in charge and the bank “forecloses on you.” You have a total loss of control at that point and I believe that is what makes it worse than it has to be.

A foreclosure hurts you credit wise in much the same fashion as a bankruptcy. In fact it pretty much just bottoms out your credit. Does it really matter if its 300 of 400 points at this point. No. The Foreclosure will be reported for 7-10 years just like a bankruptcy in most cases. When you go to apply for a loan, one of the questions is have you had a foreclosure in the last 7 years. When the broker goes to find you a loan, most banks will not accepts folks with a foreclosure on their recent record.

You can tell that I am very pro-short sale and I am. Even if you are going to do a bankruptcy you can still do a short sale.

Short Sale vs Foreclosure | Be In Control | Beverly Hills

You can forget about all the “Good” reasons to short sale. The only TRUE reason you should short sale is to be in control. Get a little piece of control and thinks will start to look up.

Regardless of what the best action is for you, I can help. With the attorney on staff, we will quickly determine what is the best course of action whether it be short sale, foreclosure, bankruptcy or a combination of these. Give me a call at 310-557-2100

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