Foreclosure in Saint Paul>Question Details

Sheila, Home Seller in Saint Paul, MN

If we can't make the payments on the house, which is the best thing to do? Short sale or foreclosure since there are no garauntees to the sale

Asked by Sheila, Saint Paul, MN Thu Jul 1, 2010

of the house before foreclosure?

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Jeanne Gavish’s answer
There are multiple options available to you, depending on who your lender is. Short selling is an option if leaving the home is your end goal. Most lenders will not consider a deed in lieu of foreclosure unless you have had the home exposed on the open market for 90 through a real estate professional. Foreclosure is the last resort. There is a federal initiative to help you save your home and I have copied the link for you to investigate. If you have a participating lender and request the program, you may be eligible for a loan modification under the new program that took effect in April. If not, they may move you to the HAFA short sale program, where you receive full forgiveness and a cash incentive at closing. To learn more go to
1 vote Thank Flag Link Fri Jul 2, 2010
A foreclosure is the worst thing that can happen to your credit. Most likely a short sale will work out better for you, but you definately need to know all your options before you can make an informed decision...and yes, foreclosure and short sale are not your only options. For a very comprehensive list of options, check out this article:…

You are going to want to talk to a team of people that can advise you on the best way to get yourself through this period and back on track. This team should probably include a Financial Advisor, Realtor (who has considerable knowledge in short sales), Bankruptcy Attorney, Tax Advisor, and a good Mortage Broker (if you plan on buying a home in the future.)
If you have this kind of team working on your behalf, you may be able to turn things around a lot faster than you expect. Much of this consultation will probably cost little or nothing. I wish you the best and feel free to contact me if you have any questions.
Adam Duckwall, Realtor at Edina Realty in St. Paul
Web Reference:
0 votes Thank Flag Link Sat Jul 3, 2010

The best thing to do is contact your mortgage company immediately. This shows you are will to work with them. Short sale will support your credit where foreclosure is harder to recover from.
0 votes Thank Flag Link Fri Jul 2, 2010
Hey, Sheila!
It sounds like you are in some considerable distress over this situation. Believe me, many people are in your boat!

There are many programs out there that MAY help you, if you qualify. But, right now, you need to set up an appointment with someone who can help you determine your next best move. As I said before, this forum is great for generalities, but we cannot help you specifically because we don't know all of the details. Please contact a real estate agent who specializes in short sales. You'll know their qualifications by how thorough they are about their disclosure and whether or not they can recommend a good legal team to advise you about your options.

Try not to despair. I know this is tough!!!! Good luck to you~
0 votes Thank Flag Link Fri Jul 2, 2010
What you need to do is CALL YOUR BANK, there are government mandated programs to help troubled homeowners that the banks has to offer. In fact if you are not proactive and do not attempt a modification you will fall under the "walk away" categorization which will make it almost impossible to get another mortgage for 7 years following the foreclosure.
If the bank can not approve a modification they will suggest deed-in-lieu-of or short sale, both less intrusive forms of foreclosure but still life changing events. If time is short the short sale avenue may be difficult but not to worry just last week the rules of deed-in-lieu-of changed and now equal short sale therefore your wait after either of those events will be 2-4 years dependent on your down payment.
Do make sure when negotiating either a short sale or deed-in-lieu-of you address the deficiency, so many of my clients did not and have unmanageable judgments against them making it that much harder to get them back on track and into a home.

Ramifications of Foreclosure, Short Sale or Deed-in-lieu-of Foreclosure

Here are some of the ramifications of foreclosure, short sale or deed-in-lieu-of-foreclosure, there are many more like; insurance rates, your job (yes employers are checking credit records these days).

Your credit score will be reduced by 200-400 points, short sale and deed-in-lieu-of a little less 100-200 points.

All forms of foreclosure stay on your credit report for 10 years.

After you have gone through foreclosure, short sale or deed-in-lieu-of-foreclosure there will be what is known as the "waiting period", this period of time varies for each and can be reduced if you had some type of extenuating circumstances that caused the foreclosure:
Waiting Periods to Buy After Foreclosure – “YES” Short Sale and Deed-in-lieu-of are forms of foreclosure
• Buying after a Walk Away Foreclosure
The waiting period is 7 years
• Buying after a Foreclosure
The waiting period is 5 years with 20% deposit up to 7 years.
• Buying after a Foreclosure with Extenuating Circumstances
The waiting period is 3 years with 10% deposit up to 7 years.
• Buying after a Deed-in-Lieu-of Foreclosure
The waiting period is 2 years with 20% deposit, 4 years with 10% deposit up to 7 years.
• Buying after a Deed-in-Lieu-of Foreclosure with Extenuating Circumstances
The waiting period is 2 years with 10% deposit.
• Buying after a Short Sale
The waiting period is 2 years with 20% deposit, 4 years with 10% deposit up to 7 years.
• Buying after a Short Sale with Extenuating Circumstances
The waiting period is 2 years with 10% deposit.

In addition to the waiting period and minimum down payment, you will be required to have a minimum FICO score and the home purchase must also be the principal place of residence, not a rental nor a vacation home.

Lastly, most loan applications will ask the dreaded question "Have you ever been foreclosed on?" this stays with you for life, many think that because it will not show up on the credit report after 10 years they can answer "no", well lying on a loan application is a felony that carries a major jail term, so be aware.

Good Luck,
Bob Patrick
Buy a home after foreclosure expert
0 votes Thank Flag Link Fri Jul 2, 2010
A short sale is always a better alternative to a foreclosure.
But better way your options by consulting with your legal advisor.
0 votes Thank Flag Link Fri Jul 2, 2010
Talk to your Realtor, and bank about this.
0 votes Thank Flag Link Fri Jul 2, 2010
You need to talk to your lender. You need to get all the facts before you can make a decision. You should also consult a tax professional and credit counseler. A short sale will have less damage to your credit score than a foreclosure will.

Debbie Albert, PA
Coldwell Banker Residential
Web Reference:
0 votes Thank Flag Link Fri Jul 2, 2010

The answer to your question is that it depends on your specific situation.

For example: if you were also planning on filing bankruptcy that would influence your answer. In addition whether or not you have more than one mortgage will influence the answer. When you plan to buy a house again, etc.

Find an agent that you can trust and have them look at your specific situation. If you don't have one have them provide you with a good referral for an attorney as well as an accoutant since this is a complicated legal and tax issue as well.

With good advice you will be able to make the best decision for your situation. Good Luck. Let us know if we can be of anymore help.

Cameron Piper
Web Reference:
0 votes Thank Flag Link Fri Jul 2, 2010
Foreclosure should be the last thing you want to do. It will ruin your credit for the next 7-10 years. By all means you shuld try a short sale if you need to sell. Make sure you find an agent expereinced in short sales, all are not so make sure you ask. You should also make sur eteh agent is eitehr expereinced in short sale negotiations or they will hire a professional negotiator who takes a percentage if the deal closes.

Good luck with working things out

Please check out my blog…

Web Reference:
0 votes Thank Flag Link Fri Jul 2, 2010
You are absolutely correct. There are no guarantees. As mentioned, credit is less damaged by a short sale.

One really has to go over the particulars of each individual case. Your situation will always be unique in some ways.

Here is a website that may be of help:

If you are thinking of a possible short sale interview 2-3 real estate agents who are specialists in this area. And remember that a two day seminar and some letters behind an agent's name (designation) does not make them an expert.

Best wishes,

0 votes Thank Flag Link Fri Jul 2, 2010
Hi Sheila,

There are many ways to avoid a foreclosure. The answer partly depends on whether your situation is temporary or permanent. If it is temporary, the lender may be able to give you some room to recover by modifying the terms of your loan, moving the amount past due to the end of the note and temporarily reducing the payments. It depends on the type of loan you have and who your lender is.

I would contact the lender, explain your situation, and ask if there is a way they can help. In most markets, the last thing they want is yet another foreclosure. Some lenders are better than others. Some are outright predators.

You might start by consulting with an agent or attorney who really knows Short Sales and Loan Modifications. The important thing is to be proactive. If you have to let go of the house, look at it this way - if it doesn't sell as a short sale, you are no worse off than if you didn't try. Get the best agent you can find, check out their Short Sale references thoroughly and let them help you. If you want an introduction, contact us. We know several great Short Sale Specialists in the Saint Paul area.

Doc Stephens, REALTOR®
Web Reference:
0 votes Thank Flag Link Fri Jul 2, 2010
Although a short-sale would be better than a foreclosure, there's an even better option provided you only have 1 mortgage on your property, and that is deed-in-lieu of foreclosure (DIL). While it's not impossible to pursue DIL if you have multiple mortgages, you'd only be able to execute DIL with the first mortgage lender, and you'd have to negotiate either to short or to take an unsecured note back for each of the remaining mortgages.
0 votes Thank Flag Link Fri Jul 2, 2010
Generally speaking a short sale allows you to get back into the mortgage world again sooner. To accomplish this you need an agent with recent successful experience doing short sales. There are many newly minted "experts" with a certificate which proves they sat through a class. There is nothing wroing with this, but if I needed help, I would find an agent who focuses on this specialty with a track record they can validate. Don't be someone's guinea pig.
0 votes Thank Flag Link Thu Jul 1, 2010
It is simple.

A foreclosure really screws you over in the credit department.

A short sale just roughs you up a bit.

It is possible you could try for a short sale and end up in foreclosure anyway. It is a real risk. However, if you just decide to go for a foreclosure there is no way you could end up with a short sale.

That means try the short sale and hope for the best. You lose nothing by the attempt and just might save some of your credit in the process.
0 votes Thank Flag Link Thu Jul 1, 2010
If you can get the bank to agree to a short sale, it will be better for you then a foreclosure. Your credit will still take a hit but it won't be as bad as it would with a foreclosure.

You need to contact an attorney and an agent in your area that specialize in short sales and forclosures. You have too many questions to be answered generally. An agent can talk to you without any fees or obligation, but make sure it's someone who has done this before and knows how to advise you. Best of luck to you.
0 votes Thank Flag Link Thu Jul 1, 2010
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