Should I Foreclose on the Property or Do a Short Sale?
Some homeowners believe that it's easier and less of a hassle to just forfeit a property and allow it to enter into foreclosure as opposed to participating in a short sale for the property. Often, in many cases, homeowners are able to remain in their home four months and even longer in some cases, depending on the state laws and how fast the lender moves to start eviction proceedings.
What Does a Short Sale Involve?
A short sale includes listing the home, generally, with a Realtor, and placing it on the market. Typically the home will sell for much less in a short sale; however, the lender agrees to the discounted amount as a settlement payment on the house mainly because there is usually not enough equity in the home to cover the balance owed on the home and closing costs as well. In the case of a short sale, the homeowner does not end up in foreclosure and the home is indicated as sold on her credit. Because it's a short sale involving a discounted price, the seller's credit may be affected slightly, but not as much as it would be if a foreclosure is involved.
If the homeowner's payments are in arrears, the seller can have his Realtor or attorney contact the lender's loss mitigation department to find out if they will consider a short sale for the homeowner. It is also important to consider whether a short sale is the best decision. It's not the best decision for all. This is because if a seller has cash assets, the seller's lender may request your assets to pay off your debt.
How Will a Foreclosure Affect My Credit?
When sellers go through a foreclosure, according to David Steep at Vitek Mortgage, their credit is severely affected. The seller's credit scores generally drop by 200 to 300 points. If a seller's FICO credit score was originally 600, for example, his or her score could now drop to 300. This can be devastating for a seller, especially after having to go through a foreclosure; however, it is not the end of the world. A consumer's credit and scores can be restored over time.
A short sale could have the same negative effect on a seller's credit and scores as a foreclosure or it may not. No one can really predict how much the scores will drop exactly. One mortgage expert located in Southern California believes that a short sale versus a foreclosure, on a seller's credit report, is the distinction between being struck by a bus or a train.
- Photo Credit www.creditscorequick.com, www.unitedstatesshortsale.com, www.bettercreditnow.us
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