Watch out. There are so many pit falls when purchasing a short sale. Rely on the advice of your experienced real estate professional.

A short sale is when your lender agrees to accept a lower balance than what is owed to them. In a short sale your can negotiate judgments. With a foreclosure everything is cut and dry, your home gets taken and then you get evicted. At least with a short sale you will be able to purchase a house sooner and maybe avoid a judgment.

Short Sale in Los Angeles County California- Is it right for me?

Cortez,


You are not alone with this confusion... Simply stated a "foreclosure" is a home whose destiny is in the hands of the bank alone. Ownership of the property is in the hands of the lending institution with the former owners having absolutely no involvement in its disposal. The bank has the sole responsibility in determining the asking and sale price of the home.

On the other hand a "short sale" is a transaction in which the seller/owner still has ownership of the property but is trying to sell the home for less than the amount they owe the bank(short sale) For this to happen, both the owners and the bank must agree on the selling price. Essentially, these owners are asking the banks to take a loss for the difference in the amount owed to them.....One can only imagine how easy this concept is for banks to accept.

Hi,

I am sorry to hear that you are in such a difficult situation. As many of the folks here before me have already stated, one of the main differences between a Short Sale and a Foreclosure is the level of impact to your credit. I usually tell clients to think of the Short Sale as a simple broken arm and the Foreclosure as a compound fracture. Both will hurt a whole lot when they happen, both will heal and both will leave scars but in the case of the simple break, you recover heaps faster and the scars are a whole lot smaller.

What you are doing when you ask your lender for permission to use a Short Sale as a remedy for your situation amounts to asking them for a big financial favor - allowing you to sell your home for the current market value which is less (sometimes significantly) than the amount you owe them and to forgive the balance of the debt.

Why a lender might agree to this solution is because a Short Sale can save them money and time in dealing with the problem. It also helps them to improve their appearance to their investors by allowing them to get a bad debt off of their books more rapidly and to thus improve their ratios (a very important thing especially when lenders are currently under such scrutiny about their solvency).

The suggestion of a loan modification has also come up several times here as well. Here is the least you need to know about pursuing that solution. You don't need ANYONE to help you do a loan modification if you are capable of calling your lender, collecting the paperwork they ask for (usually three years tax returns, current bank account information, current information about what you owe versus what you earn and verification of your current employment status).

There are a whole slew of companies out there springing up like the weeds that they truly are which will, for a "small fee" (read that hundreds to thousands of your hard earned dollars) help you process your Loan Modification. I have seen the work they have proudly done for some of their clients and while they have indeed helped their client to get a reduction on the principal amount due, in one case, it only reduced the payment by less than $200 per month. Frankly, if the difference between someone being able to afford their mortgage and not being able to is $200 then the truth is, they really can't afford their mortgage and the money they paid to the Loan Modification company really was poured down a rat hole. Oh, and I forgot to mention that for this reduction, the company charged the family $4500. Now, let's do the math here, shall we... $200 x 12 = $2400. $2400 x 2 = $4800. So, it will take this family just under two years of the "modified payment" to get back to where they were financially before they hired the company.

Another very important thing to note, if you choose to pursue a Loan Modification, please be aware that this will not stop or even necessarily delay the processing of a Foreclosure. And even if the modification is granted there will still be some damage to your credit (albeit far more minimal) because of the late or missed payments.

I wholeheartedly agree that you need to speak with your lender first and foremost to see if they really do have a solution that might aid you. But I would also advise you to sit down with a local Realtor to privately discuss your personal situation and to go over all the options that might be available to you.

I hope this helped. If you have any additional questions, please feel free to get in touch with me either via email at Tisza@HomesByTisza.com or on the phone (909) 837-8922.

I will hold good thoughts for you and your family.

Take care and have a good day!

Tisza Major-Posner, Realtor,DRE#01784679, IVPG Realty

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0816.pdf

Check this link out it gives you the fnma underwriting guidelines effective june 2008. it will give you an idea how the a foreclosure or a short sale will effect your credit and how those options limit your ability to purchase another home.

The main why a foreclosure a short sale effects your credit !

The best option to try is working with your bank to do a modification which does not effect your credit. The thing is that you have to be persistent because dealing with the bank is not easy.

The other thing to keep in mind the mortgage company will foreclosing at the same time they may be working with you on a modification. You need to look at multiple options at the same time.

You may want to check other questions I have answered on foreclosure to give you more information.

Wish you well but remember the foreclosure time frame in California is a short time frame



Keith Manson
First Weber Group
Certified Distressed Property Expert
Greenfield,Wisconsin

WHY ? it effects your credit.

I consult with many families across the country assist in this matter and how work with lenders benefit for all parties.

Short Sale need lender approval request for hardship info. package.

National Featured Realtor and Consultant, Mortgage Loan Officer, Lecturer regarding Credit Repair
Lynn911

Have you also considered a loan modification? Please look at http://makinghomeaffordable.gov/evaluator.html to see if you can qualify. Also there is now a refinance option avalible for some homeowners that are upside down, check out http://makinghomeaffordable.gov/refinance_eligibility.html. There are many other options forclosure should be the last resort. Call me anytime. I'd love to help you. Let's set up a free conseltation to explore all your options.

You might want to take a look at my blog here on Trulia, titled short sale vs. foreclosure....I just addressed what the difference was briefly.

The main difference between the two is the impact on your credit score. You should talk to your tax preparer, or attorney as to what may be most beneficial to you.

However....word of advice, if you elect to choose foreclosure...stay in the home as long as possible. I recently had a client contact me that their attorney advised them to file foreclosure and more out immediately. That was 8 months ago, and the foreclosure still has not taken place. They could have still been in the property and saved that money they paid for rent.

Good luck on whatever decision you choose.

Tammy