Benefits of a Short Sale Rather Than a Foreclosure
There are several advantages to doing a short sale rather than modifying a loan or allowing a home to go into foreclosure:
- In many cases it may take years of mortgage payments before your house is worth what you owe. Most mortgage payments on a home loan only cover the interest in the beginning before touching the principal.
- Some people have a payment that is going to adjust higher in the future. Many people have chosen to get out of these unfortunate situations by pursuing a short sale. (More than 20 years until home prices reach pre-bust levels, Moody’s says)
- A short sale has the potential to bring a new buyer into the property immediately. This avoids foreclosure signs, dangers to the neighborhood of having vacant and non-maintained properties that may become targets to vandalism or squatters.
- If you short sell while current, your credit is usually not as affected. Most of our clients report their credit score fell only 15-30 points if they were current on their mortgage payments. The short sale will be reported as a “debt settled less than the full amount”, “account paid in full for less than full balance”, “paid as agreed, paid as settled”, “negotiated”, “paid in settlement/never late or account legally paid in full for less than full balance”. You can also purchase a house sooner, and in some cases right away. Click here to see examples of short sales we did when the seller was current, and how their credit was affected.
- It will not be in the public records that you were foreclosed upon.
- Credit and loan applications ask whether or not you have had a foreclosure. Currently, credit and loan applications do not ask if you have short sold your home. As such, you may be denied credit (credit cards and loans) if you have a foreclosure on your record, however a short sale is better for your credit.
- You will be able to qualify for a loan sooner and buy a home sooner if you short sell your home rather than foreclose.
- If you are delinquent when you short sale, your credit score will not be as affected as if you were to foreclose. Usually a foreclosure takes longer, so the longer you are late on your payments the more your credit score is affected. If you short sell while delinquent, your credit score will probably drop 50-80 points per loan that you are delinquent on. The credit score effects of a foreclosure may be 3 years, whereas the credit score effects of a short sale are 12-18 months.
- If you foreclose and hold a high security position, it may affect your employment, so this is another reason to short sell rather than foreclose.
- You can negotiate a deficiency waiver away in a short sale, whereas if you foreclose, the lender can pursue you for a deficiency judgment and garnish your wages, lien your property and freeze your bank accounts.
- Since the market is taking a turn and prices are going up and interest rates may also go up, a short sale will allow you to buy quicker than if you foreclose. You do not want to be priced out of the market and missing the opportunity to purchase at a lower price.
- In some cases you may be able to get paid by your lender to do a short sale. In some cases, our clients have received $3,000 to $33,000 in compensation for just short selling their house.(Click Here for Details)
If you’ve had a financial hardship such as reduced income or increased living expenses there are also short sale alternatives.
- You can request a loan modification that has the possibility of reducing your principal and/or removing a second mortgage, enabling you to keep your home with a reduced loan balance.
- You can voluntarily give title of your property to the mortgage Lender in exchange for forgiving your mortgage. This deed in lieu of foreclosure is an exit strategy that can avoid the foreclosure process and have less impact on your credit score. This is very rare as banks do not normally grant deed’s in lieu of foreclosure unless all your options have been exhausted.
Van and Associates Law Firm has helped many in the Las Vegas and Henderson community with foreclosure, short sale, bankruptcy, debt settlement, loan modification, and personal injury. Please feel free to contact us today so that we may discuss the options that are available to you.
Van and Associates Law Firm at 702-529-1011