By Patrick McCarran
Real Estate Broker
If you are struggling to pay your mortgage and think a move may be in your best interest,you have options. If you have equity then it is a little easier, you can sell and take the equity and move. The challenges arise when you do not have equity. However, there are solutions and help available.
A Short sale is when the borrower/owner sells a property to a third party during a pre-foreclosure process. It is called a short sale because the owner will sell the property “short” of the balance owed on the note. Since the end of the recession and financial crisis the various banks and lending institutions have become much more workable in approving short sales. If you are considering a strategic default, I suggest you look into a short sale an option.
While there are initially some significantly negative consequences to your credit history, once the short sale is complete it will show on your credit report as “paid as agreed” “paid as negotiated” or “settled for less than the full amount due”. Depending on how the creditor chooses to report to the credit compiling agencies will determine the impact on your score. If you chose to walk away from the property and your property is foreclosed upon the foreclosure will remain as a public record permanently and can remain on your credit report for up to ten years.
A Foreclosure may lower your credit score anywhere from 250 to more than 300 points, and typically your credit score will be affected for over three years. In the case of a short sale, it may lower your credit score as little as 50 points if all other payments are being made. A short sale’s effect can be as brief as 6 to12 months on your credit history or FICO score.
Once you regroup and are ready for homeownership again how long must you wait to buy another home? Again, the short sale may be traditionally the better choice, thecurrent home loan guidelines call for a minimum 24 month period following the short sale before you will be considered for a new home loan. However, with a foreclosure the consideration time ranges form 3 years to 7 years. Please not that these guidelines depend on a variety of criteria including your individual circumstances and overall credit worthiness.
One of the most compelling reasons for a short sale above a foreclosure is the simple fact that it puts you back in charge of your immediate future. A foreclosure can occur in as little as 3 months or as longs as years, yes over 12 months. The problem is YOU do not know how long the foreclosure process is going to take, so all you can do is just wait for the foreclosure notice and the knock on the door telling you need to vacate the property.
With a short sale you and your realtor will have a plan of action. A short sale is not always right for everyone. And remember to always seek legal and tax advice before making the decision of a short sale verses foreclosure.
If you have any questions or need more information, please call and let me help you make the best real estate decisions.
Patrick McCarran is a local Realtor and Broker DRE# 01325072. He can be contacted by phone or text at (925) 899-5536, pmccarran@yahoo.com or www. CallPatrick.com. An independently owned and operated office. In association with Realty One Group Elite DRE# 0193160. Equal Housing Opportunity.
