Home Selling in 25401>Question Details

Heatherton, Home Seller in Martinsburg, WV

What's the difference between short sale and foreclosure, in terms of credit score changes and what the (former) owner does?

Asked by Heatherton, Martinsburg, WV Sat Jan 8, 2011

My wife and I suspect we may not be able to sell our home for what we owe on the 30-year mortgage we entered into initially almost 6 years ago, re-financed once, and most recently renegotiated with our lender when we got behind on our payments. The re-financing was to take advantage of falling interest rates, prior to the current real estate crisis. The re-negotiation (unsure if this is the right term) was prompted by a involuntary change in employment which resulted in a loss of income. Two years later, in order to avoid another loss of income, my wife & I are considering a re-location, but are doubtful we will be able to find a buyer for our 56 year-old house if we price it at the current pay-off amount, as listed by our mortgage lender, Taylor, Bean & Whittaker.

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Answers

6
Great Question and one of the most common questions asked regarding this subject matter....and one of the most improperly answered.

Here is the real answer: NO ONE REALLY KNOWS COMPLETELY!

Yes, most will admit logically that the foreclosure is worse for your credit than the short sale, yet none of us know what the future holds. I had a customer walk from and 8 plex in the early 1990's and refinance into an "A" paper loan less than one year later.

No one can tell you how much your credit score will go down. I listened to an analyst from Lloyds of London explain the credit scoring system and it would be easier to speak Mongolian than try and understand or repeat what he said. Many factors contribute to your score reduction including but not limited to whether you are paying your other debts, how many months you miss your mortgage payment, if there have been previous defaults on loans or credit card payments in the past, and on and on........

With the quantity of credit score damage currently taking place with the american public, we don't really know what lenders will do 4 years from now to encourage folks to get loans. What if the credit score system completely changes. They've been talking about it.

Just make the right choice by doing good homework. There aren't many reasons to allow a foreclosure if a short sale will work.

Matt Clausen, Broker
Clausen Group Realtors
Greater Nashville Area
615-452-8700
0 votes Thank Flag Link Tue Jan 11, 2011
Hi Heatherton,
My name is Mary Lllewellyn and I am a Certified for Short Sales and have done many that are very successful !!!
It certainly does depend on your situation which I would be happy to discuss with you.
I could also provide some references of some of my past sellers who I've help during this stressful and restless nights. Like the other agent said there is a light at the end of the tunnel .........
A short sale is less harmful to your credit than a foreclosure is.
Please feel free to call or email me for a free consultation.
Sincerely,
Mary Llewellyn 301-992-5946 or maryllewellyn@kw.com
0 votes Thank Flag Link Mon Jan 10, 2011
Hi Heather,

I am a REALTOR in Martinsburg and would be happy to point you in the right direction, which may or may not be a short sale. I cannot give you any legal advice, but it may be in your best interest to talk with a debtor attorney to determine the best decision for your particular situation. You will also need to talk with your lender to determine if you are eligible for a short sale. If you have restructured your loan recently you may not be able to do a short sale for a period of time. Depending on the reason for the default, you may be required to being funds to closing or sign a note for the deficiency. West Virginia is a deficiency state, meaning that the lender can hold you responsible for their loss, whether a short sale or a foreclosure. In a short sale transaction, you can try to negotiate that away, in a foreclosure you have no chance to do that. There are no black and white answers to this, every one can be different depending on the lender, your hardship, you remaining assets, the amount of loss, time of delinquency, type of loan and if there is private mortgage insurance on the loan. I would be happy to sit down and talk with you so that you know your options. We have done short sales for years now and have had a good success rate. Feel free to contact me.
0 votes Thank Flag Link Sat Jan 8, 2011
Hi Heatherton, Eli has covered the high spots (short sales will have only short term impact on your credit; a foreclosure will follow you for longer - perhaps 7 to 10 years. Feel free to contact me to assist you in marketing yournhome should you decide to relocate. I can be reached at 304-676-2904 or by email at mattridgeway@remax.net
Web Reference: http://www.mattridgeway.com
0 votes Thank Flag Link Sat Jan 8, 2011
Hi Heatherton,

To answer your question, a short sale is far less of a hit to your credit than a foreclosure. Two years after a foreclosure you will probably be able to buy another property. I think a foreclosure will damage your credit for ten years. You can double-check that with a credit reporting agency.

To complete a short sale, the homeowner will have to put the property on the market and generate offers, like any other sale. In addition, the seller will need to complete a short sale packet for the lender. We can provide this short sale packet to you. In a foreclosure, the seller does absolutely nothing, and the bank will process the foreclosure. Also, if West Virginia is a recourse state, the bank could come after the homeowner for the deficiency judgement. You could ask an attorney about this. If we negotiate a short sale, we might be able to get the seller off the hook for the deficiency judgement.

Please call us directly to discuss your specific situation. Our services are FREE to homeowners. We look forward to hearing from you.

Eli Givoni, Director
Short Sale Department, LLC
561-361-1909
info@shortsaledept.com
http://www.shortsaledepartment.com
Serving all 50 states
0 votes Thank Flag Link Sat Jan 8, 2011
Hi Heatherton,

You can do a short sale. When you owe more to the bank than the house is worth, we will negotiate with the bank for you to get the bank to accept a payoff less than the full balance due. Please call us directly to discuss your specific situation. Our services are FREE to homeowners. We look forward to hearing from you.

Eli Givoni, Director
Short Sale Department, LLC
561-361-1909
info@shortsaledept.com
http://www.shortsaledepartment.com
Serving all 50 states
0 votes Thank Flag Link Sat Jan 8, 2011
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