Short Sales
WHAT IS A SHORT SALE?
Simply put, Short Sales occur when borrowers sell their property for a sales price less than the amount owed to their lender. A Short Sale is a win-win solution for the homeowner and the lender.
WHAT ARE THE BENEFITS OF A SHORT SALE vs FORECLOSURE?
| ISSUE | FORECLOSURE | SHORT SALE |
| Future Fannie Mae Loan |
Borrower is ineligible for a Fannie Mae backed mortgage for 5 years on a primary residence, or 7 years for an investment. |
Eligible for Fannie Mae backed mortgage after 2 years for primary or investment property. |
|
Future Loan with any Mortgage Company |
On a 1003 application, answering YES to the question, "Have you had a property foreclosed upon or given title or deed in lieu thereof in the last 7 years?" will affect qualification and rates. | There is no similar declaration or question on the 1003 application regarding a short sale. |
| Credit Score | Credit score may be lowered anywhere from 250 to over 300 points. This will typically will affect score for over 3 years. | Only late payments will show and after sale, mortgage will be reported as paid or negotiated. Score will be lowered as little as 50 points, lasting as brief as 12-18 months. |
| Credit History | Foreclosure will remain as a public record on credit history for 10 or more years. | Short sale is not reported on a credit history. There is no specific reporting item for "short sale". The loan is typically reported as "paid in full, settled". |
| Employment | Many employers require credit checks on applicants and periodic credit checks on current employees who are in sensitive positions. In most cases a foreclosure will challenge employement and sometimes be grounds for reassignment or termination, especially with security clearance positions. | A short sale is not reported on a credit report and is therefore not a challenge to employment. |
| Deficiency Judgment | In 100% of foreclosures (except in those states where there is no deficiancy) the bank has the right to pursue a deficiency judgment. | In some successful short sales it is possible to convince the lender to give up the right to pursuit a deficiency judgment against the homeowner. |
| Deficiency Judgment Amount | In a foreclosure, the home will have to go through an REO process if it does not sell at auction. In most cases, this results in a lower sales price and higher deficiency. | In a properly managed short sale the home is sold at a price close to market value and in almost all cases will be better than an REO sale resulting in a lower deficiency. |
If you or someone you know is facing foreclosure, please give me a call. There is absolutely no cost to the homeowner to short sale their property. I will work with the bank to negotiate a sale and administer the details. I will be there to help the homeowner every step of the way. For the homeowner, there is everything to gain and nothing to lose. Contact me today!
