If you are already close to that 90day late payment the tough thing is that there are not that many differences between a short sale and foreclosure.
1) In truth your credit will get hit HARD no matter which route you choose, and much like a bankruptcy it is going to take time for creditors to start sending you mailings for credit cards and such (although car loans are pretty easy to obtain and these people will bombard you with offers). If you stay current on your other credit lines this will have a very positive impact and drastically help you rebound, because you won't have to rely on opening new credit. From a practical standpoint your home loan is usually the last bullet, so most of the time other credit cards are also going to be behind.
It really does not matter if a short sale puts you at 580 and a foreclosure puts you at 560. Much depends on where your current credit was before this all happened, and if I can be plain the credit score won't matter for another 3 years as much as rebuilding and obtaining credit. Is the #1 thing I see misunderstood when working with buyers.
2) That is why many people choose to look at bankruptcy as a 3rd option between short sale and foreclosure. There is no sense in going through this ordeal only to still be in a tough spot with your other creditors due to the lost job. Part of this process is having a huge "reset button" where you can start with a clean slate. Only an attorney can give you legal advice on this matter, but I will say that I see a lot of cheap ones out there that will do it for under $1,000 bucks.
3) If you only have 1 loan Minnesota is in a "non-recourse state". It means that your primary lender can't go after you for a deficiency if the sheriff sale does not cover the whole mortgage. Yes they have to do foreclosure by advertisement for this to take place, which is pretty much 99% assured.
IF YOU HAVE MORE THAN 1 LIEN/MORTGAGE ON THE PROPERTY SHORT SALES ARE GENERALLY THE BEST ROUTE. THIS IS THE BIGGEST ADVANTAGE AND ONLY ADVANTAGE I HAVE WITNESSED LISTING MY OWN. That is because we can negotiate the 2nd mortgage (or judgments you may have too). I would need to speak with you more about this, but essentially we use the property to settle the debt instead of you paying anything.
Short sales don't cost you anything (at least they shouldn't) but there is always the risk of the lender asking for a promissory note on 2nd mortgages for a fraction of the total balance. It just comes down to your financial capacity. You will always have the final decision.
2ND LIENS/MORTGAGES DO NOT FULL UNDER OUR STATE'S NON-RECOURSE LAWS. THEREFORE, A LENDER CAN PURSUE YOU AFTER THE REDEMPTION PERIOD FOR ANY DEFICIENCY AMOUNT.
4) You will fall under the mortgage debt forgiveness act regardless of whether you do a short sale or foreclosure as long as this is your PRIMARY RESIDENCE. It looks like it is.
5) Another option would be to rent the property out for the next couple years and wait until you have enough equity to sell. Both rentals and single family housing is very tight right now and we are seeing price gains in both areas. You can probably get $1100/month depending on the area for a 2br right now.
I will say there is an emotional break that happens a lot in this situation where sellers just want to be done with the house. Sometimes a short sale may not have a ton of advantages over foreclosure except that you are taking action and having someone help bring certainty to the situation.
I use the word CERTAINTY a lot with homeowners because this is a frustrating, emotional, and confusing time in your life. My job is to help you find the BEST option for your situation and provide an adequit SOLUTION. When that happens you have certainty and peace of mind.
The only way that happens is if you take action and reach out to me. I live pretty close to you in Vadnais Heights and would love to review your situation.
I'm so so sorry about your job loss. This economy has been a smack down for so many people. I'm sure this was never in your head when you bought this place in 2009. Sometimes, someone just needs to say I'm sorry this is happening to you.
As for your question, your credit is going to be hit no matter which choice you make. There is an argument to be made that you won't get hit AS BAD if you do a short sale. I'd say the difference is somewhat negligible.
I guess the good part about a short sale is that it's over with as soon as it sells. I know in a foreclosure some people say you can just "walk away", but many of us still feel responsible, as though we have to try to make it "alright" in some way. Search your heart, talk to a couple of agents, talk to your lender. Then, make your decision.
Would you be willing to provide a little more information? (You do not have to post it on this public forum, if you would rather send me an email, that is fine) Once I better understand your situation, I will explain the pros and cons of a short sale vs foreclosure and we can determine the best strategy that fits your needs.
These are a few questions I need answered for now -- How long has it been since you made your last mortgage payment ? Is this home your primary residence? Do you have a 2nd or 3rd mortgage? Has your mortgage company offered any assistance? Are you the sole name on the mortgage or is there another person involved?
MN Real Estate Options
Broker/Owner/Short Sale Professional
Accredited Platinum Real Estate Professional
Phone: (952) 443-2056
Fax: (952) 236-6429
Cell: (612) 801-2355
Check out our website at http://www.mnrealestateoptions.com for great information on all aspects of real estate, for Buyers, Sellers and Investors
I am sorry to hear about your situation. A short sale will ding your credit but not quite as much as a foreclosure. I would recommend speaking with a Realtor and a real estate attorney about your course of action. We have both available to you. The consultation with the attorney is at no charge. On short sales the lenders pay our fees. What we try to do is generate a little cash for you if possible. Let's meet for coffee to discuss.