Archive | April, 2011

Short Sale Vs Foreclosure

April 13, 2011

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If you find yourself in the position of having to decide between letting your lender foreclose on your home or attempting to sell in a short sale, below are some pros and cons for each option. A short sale is a great idea in the current real estate market.

Foreclosure

This is a legal process used by your lender to reclaim your property and sell it to pay off your loan. Some are opting to simply let the banks foreclose on their properties and walk away from the loan. If you have the means to continue paying your loan you should continue to pay. A foreclosure will reflect more negatively on your credit report compared to a short sale.

The foreclosure route is the shortest path to ridding yourself of your problem but also the most damaging.

Short Sale

You can request permission to conduct a short sale from your lender at any time. You do not need to be in default to receive permission however you will most likely need to meet several other criteria before you are granted permission. The obvious benefit to this is that you can get out of your current loan early if you are ok with taking a loss.

A short sale also will not hurt your credit score as bad as a foreclosure. If your credit is in ok condition you could possibly purchase another home immediately after your short sale.

At the moment the government is not taxing any debt forgive by your lender during a short sale. All the more reason to seriously consider going the short sale route.
A foreclosure is just all around a bad thing to have on your credit report and will hinder future home purchases for years to come. A short sale can be lengthy and bothersome but it will save your credit and allow you to purchase another home when you feel you are capable of fulfilling your payments.

 

short sale vs foreclosure table data

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Is A Short Sale Still a Good Idea?

April 7, 2011

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I get asked all the time about the short sale process. Is it a good idea? How bad does it damage your credit? Why does it take so long? While the process can be extremely length at times, overall it is still a good idea for those in a specific situation. We all know that market values on the majority of homes has dropped and in some cases quite significantly. If you are willing to take a loss on your home and want out of your current situation then a short sale is a great idea.

It will have an impact on your credit report but letting your lender foreclose on you would be worse. If you are in the position where you would request a short sale from your lender you might not need to be worrying too much about your credit. Chances are it is already somewhat damaged from late payments from your financial burdens. One of the requirements lenders look at is financial stress when considering your request for a short sale.

The length of the process can be cumbersome for most people. The name of the process is a bit of an oxymoron as there is nothing short about the process.  The good news is that congress is attempting to push through some legislation that would speed up the process. The length can be due to a backlog on your lenders end and then they may want to evaluate your request in several areas. Are you financially stressed to the point where they feel it would be worth taking a loss? Do you have a job? Gone through a divorce? Those things would help you in your request. Remember though, your lender does not have to honor your request but most will right now due to not wanting to take on another home.

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Information About Short Sales

April 5, 2011

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If you are unsure about what a short sale is I will help you understand. In a short sale you are selling your house for less than its current market value. You will not make any money from selling your home.

In this process your lender will forgive a portion of your debt. You may have to pay taxes on this forgiven debt so please keep that in mind. In order to sell your home in a short sale your lender will have to agree to allow you sell. Your lender does not have to agree but they are more likely to honor your request if you meet certain criteria.

Have you lost your job and are unable to find new work? Have you gotten a divorce? Has there been a major death in the family? Is your home worth significantly less than what you paid? Your lender will require proof from you if you make any of these claims. It is your responsibility to do all of the footwork and present a compelling case to your lender in order for them to approve.

The good news is that in the current housing market most lenders are willing to work with you on a short sale instead of going into foreclosure. A short sale is only slightly better than a foreclosure on your credit report and lenders will be able to tell you sold your home in a short sale. Also, remember that there is nothing short about a short sale. The process can take a long time to complete bringing stress and frustration to your already troubled housing problems.

It’s a good idea to hire a realtor who works with short sales on a regular basis to help guide you as smooth as possible through the entire process. This can make a huge difference in the amount of time it can take to complete. The lender may require you to spend less on your realtor since you are asking them to take a loss on the house.

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Is A ‘Short Sale’ A Good Idea?

April 2, 2011

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If you find yourself upside down on your mortgage due to unforseen circumstances in this terrible housing market you should look into a short sale. A short sale allows you to sell your house for a loss and before the downturn in the housing market banks would rather foreclose. Your lender would have to agree to the short sale and they can deny your request if they choose.

The bank will look at several factors when evaluating your request. Have you lost your job recently? Has there been a death in the family? Have you gotten divorced? Is your home worth significantly less than what you paid for it? The bank will look at all of these circumstances before they make a decision on your request.

When it comes to your credit report a short sale is only very slightly better than a foreclosure and all creditors will be able to tell you sold your home in a short sale. Obviously this is better than being foreclosed. You may also run into a tax issue with the IRS. The IRS may treat the value of your home that is absorbed by the bank in the short sale as income on your end. That would make you responsible for paying taxes on that dollar amount.

The good news is that many lending institutions are willing to work with you on a short sale in this current market. You should look into every scenario before deciding on your path.

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