is a charge off/written off with the balance showing on short sale really devestating?

Asked by Katherin, San Pablo, CA Sat Mar 7, 2009

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Keith Manson-…, , Milwaukee, WI
Sun Mar 8, 2009
The best thing I can suggest to ensure the home seller gets the best information. Please check out a blog I did 3/1/09 indicating the benefits and draw backs of foreclosure and short sales under foreclosures in milwaukee county or check out the article I pulled the information from by elizabeth Weintrab on About.com.

The original article is at: http://homebuying.about.com/od/shortsale/qt/071707_SSreon.htm

There are reasons to do short sales and lenders do take them in consideration when doing a new loan but they hit your credit hard. I am a realtor that works short sales and just want my customers/clients to understand the worst thing that could happen to them. Look at the article it puts it into perspective.

It sounds like you can do a usda loan as long as you meet the requirements and your in the right location.

Good Luck!
0 votes
Chris Suarez…, Mortgage Broker Or Lender, Spring Hill, FL
Sun Mar 8, 2009
I am a Mortgage Broker and also handle Credit Repair. The Short Sales are not looked at as bad as the Foreclosure and as previous responses stated, it is not on the public records to harm you in that way.
Fannie Mae, Freddie, and the Lenders do look at this though for future financing BUT, if you do this short sale and start right away to re-establish yourself with other credit. The ONLY loan program out right now that does not look at the timeline from a BK, Foreclosure, or Short Sale is a USDA loan. (Department of Urban Development). You HAVE to have a Min. score of a 620 to not have the adverse credit affect you. You will need a good Letter of Explanation as to what happened and why you had to do a Short Sale. I do these loans all the time and it is a GREAT thing and for everyone! You do have to meet the criteria though. (Property area, income limits, etc.)

You just need to prepare and work on credit and getting back on track as soon as you are done with the Short Sale.

Chris Suarez
Web Reference:  http://SuarezHomeFinance.com
0 votes
Steven Ornel…, Agent, Fremont, CA
Sun Mar 8, 2009
Hi Katherin, from a credit perspective, a Short Sale is in fact more advantageous.

Here's what I'm hearing from a credit scoring specialist who has been in the biz close to two decades: going into a short sale gives you more opportunities to minimize the affect on your score. In addition, your ability to have your score bounce back is better with a short sale. Why?

Immediate affect –
a.) With a short sale, you may be able to keep payments current (avoiding the derogatory scoring there), and you can negotiate with the lender as to how it is reported to the bureaus. For example, if the bank reports the account paid and closed, you’re better off than if it’s reported as being settled for less than owed. That may be a bit of a long shot, but the point is you have some negotiating range.

b.) Foreclosures go on to public record, where short sales do not (just your credit report).

Bouncing back -
a.) Credit bureaus put short sales in a different scoring bucket than foreclosures when generating a score. The foreclosure bucket is dealt with more severely in that it takes longer to recoup the points lost by the event.

b.) Besides the scoring by the credit bureaus, lenders (read Fannie & Freddie) allow a return to the best rate pricing sooner with a short sale (2 years) than with a foreclosure (5 years)

Other Considerations -
1.) Credit scores hit in a range of 80-200 points from best case to worst case with short sales. Figure it’s closer to 200 points with a foreclosure. This is consistent with other articles I’ve seen.

2.) Beware of the Promissory Note that stays on. In some circumstances, a bank will agree to a short sale if the Seller agrees to sign an unsecured promissory note for some additional amount. This obviously would allow for the lender to recoup some of its lost money after the short sale. However, if the burden of that debt leads the Borrower into bankruptcy, then the Borrower has the worst of all worlds. That is, there is a BK as well as a foreclosure on the credit report. That’s one more public record; it lasts for 10 years, hurts score additionally, and makes it harder to bounce back.

Best Regards, Steve
0 votes
., , Los Angeles, CA
Sun Mar 8, 2009
YOU WENT TO ALL THAT EFFORT AND THE MAN BELOW IS CORRECTO MUNDO. ITS NO BETTER THAN A FORECLOSURE - LENDER CRAM DOWN, UNWIND, PI@@ BACK , LENDER EAT'S IT \

STRIKE YOU OUT OF HERE - TAKE A HIKE

BAD NEWS SO DONT GO OUT OF YOUR WAY NEXT TIME TO HELP OUT YOUR FRIENDLY LENDER ON A SHORT SALE.
0 votes
Keith Manson-…, , Milwaukee, WI
Sat Mar 7, 2009
Yes! I believe it will be at least a 200-300 point hit on your credit report scoring. If it is a short sale it will be close to two years before you will be able to get a new loan unless when you did the short sale you were less than 60 days deliquent.
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