Short Sale vs Foreclosure
Sunday, February 22, 2009
Short Sales offer the homeowner many more benefits than going through a Foreclosure. In the case of a short sale, the benefits to the homeowner are:
- Only late payments on the mortgage show on a credit report and after the sale of the home, the mortgage will be reported as paid or negotiated. This could lower a homeowner’s credit score by as little as 50 points if all other payments have been made. The affect of a short sale can be as brief as 12 to 18 months.
- A 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.’
- A Short Sale on its own does not challenge most security clearances whereas a foreclosure does.
- A Short Sale is not reported on a credit report and is therefore does not present a challenge to employment.
- In some successful short sales it is possible to convince the lender to give up the right to pursue a deficiency judgment against the homeowner, (i.e., payment of the shortfall or the difference between what was owed and what the bank received.)
- Under the Mortgage Forgiveness Debt Relief Act of 2007, if a deficiency is forgiven or cancelled, the home is a principal residence, and it is worth less than $2 million, the tax on the deficiency will be forgiven. This benefit applies to homes that are the subject of a Short Sale and a Foreclosure.
Click the links below for more details about The Mortgage Forgiveness Debt Relief Act of 2007
http://www.irs.gov/individuals/article/0,,id=179414,00.html
http://www.whitehouse.gov/news/releases/2007/12/20071220-6.html
http://www.whitehouse.gov/news/releases/2007/12/20071220-6.html
- A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 yrs.
- An Investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years.
If you feel you are near foreclosure, please contact me, Ashton Gustafson of The Bishop Group. I can help you decide what your options are and explain what is in your best interest.