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Benefits of Doing a Short Sale
· You will keep a full blown foreclosure off your credit history. A Short Sale will impact your credit much less than a foreclosure. Before and after studies have shown that a foreclosure will lower your credit score more than a Short Sale will lower your credit score.
· You don't have to say "Yes" when asked on future loan applications whether "you have had a house go to foreclosure"
· You will be eligible, under Fannie Mae guidelines, to buy another home in 2 years instead of 5 years for a foreclosure. FHA and VA have no published wait guidelines, and if you get your credit score back up with a one year good pay history, you can qualify for a new loan.
· We negotiate with the lender for FULL SATISFACTION of all debts. If the house goes all the way to foreclosure, costs continue to add up until the lender gets the house resold. The deficiency will be much higher than if they do a Short Sale, and the lender could pursue a deficiency judgment against you, and they have no input.
· Working out a Short Sale may allow you to avoid filing bankruptcy.
· No mortgage payments to make during the process, so you can save up money for a move.
· Retain some dignity in knowing that you sold your home.
· You won't suffer the social stigma of the "F" word: Foreclosure.
· Although you won't receive any funds at closing, it won't cost you anything either. All costs of the sale come out of the lender's proceeds.
· Typically homes sold in a Short Sale are sold "As-Is", so you won't need to spend any money fixing anything, unless you choose to do so.
CLICK HERE
for a comparison chart showing Foreclosure vs. Short Sale
Drawbacks of Doing a Short Sale
· Waiting for the bank to respond to an offer can be frustrating.
· The bank will want to examine personal records such as tax returns, bank accounts, pay stubs, assets and liabilities, in addition to asking for a hardship letter from you.
· Accommodating prospective buyers will mean showing your house. If you have already moved, or plan to move soon, this is not an issue.
· There is no assurance the bank will accept a Short Sale offer.
· As a short sale represents a loss for the lender, they can report the amount lost as debt forgiveness to the borrower. They could issue a 1099-C as income to the borrower. However, the Mortgage Debt Relief Act of 2007 allows borrowers to exclude this income for a principal residence (Refer to IRS Publication 4681 and IRS Tax Form 982 for more info). It should be noted the lender can do this in a foreclosure as well.
· If you have significant assets, you are giving information to the lender that they might use to try and get some of those assets.
Do the Benefits outweigh the Drawbacks?
That's for you to decide, but we think they do.
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