Should You Short Sale Your Home Vs Letting Your Home Foreclose
Should You Short Sale Your Home Vs Letting Your Home Foreclose
Many people don’t know the difference between Short Sale and Foreclosure. As a Real Estate professional I get asked this question way too often. So let me take a few minutes to explain the advantages and disadvantages of both.
Here are some different senerios:
Your home is under water so you decide to just let it go. (Which means you owe more on the home then its worth). Whether you’re still making payments or not.
Your household income status has changed and you cant afford the home anymore
Short Sale Benefits:
Here are a few benefits for doing a short sale that may not have occurred to you:
You are in control of the sale, not the bank.
You are represented by a professional Real Estate Agent that guides you through the entire transaction and is there to answer all your concerns instead of stressing, asking yourself what if? or losing sleep, thinking to yourself when?
You may sleep better at night knowing who is buying your home.
You will spare yourself the social stigma of the “F” word, foreclosure.
Your home sale will be handled like any other home sale, with respect and dignity
Short sale buys you some time to get things in your life together and not being forced out any day.
Buying a Home Again After a Short Sale:
If your payments have never fallen behind 30 days late and the lender does not require that you pay back the loan, Fannie Mae guidelines may allow you to buy another home immediately. Finding a lender who will fund that kind of loan is very difficult. It is easier to find a portfolio loan. If you are current on your mortgage, you can qualify for an FHA loan immediately as well, but lender requirements can be weird such as you have to move more than 600 miles away.
If your payments are in arrears yet a short sale is granted by your lender, you may qualify to buy another home with a Fannie-Mae backed mortgage within two years, regardless of whether the home is your primary residence. The wait for FHA is 3 years.
Typically after a Short sale many people are able to obtain a new mortgage loan and purchase a home within 2 to 3 years of a short sale. Where as if you foreclose and let the bank take your home you cant purchase for 7 or more years.
Affects on Credit After a Short Sale:
Also with a Short Sale once the home is bought and closes and everything else on your credit is paid on time, your credit score should start gradually increasing right away. Where as if the home is foreclosed it’ll take 5-10 years to raise that score again. A short sale may be considered to be a derogatory mark on your credit even though credit bureaus do not show the word “short sale” on your credit report. It may say “paid in full for less than agreed” or “settled for less,” among other categories. Certain HAFA guidelines allow for no hit to credit and can show up as paid in full, ask a Certified HAFA Specialist how. Some non-HAFA clients report small negative FICO score drops from 50 points to 130 points. Major point drops are typically due to being in default, meaning you have fallen behind on your payments for months.
Affects on Credit After a Foreclosure:
Depending on your credit history and other guidlines, Myfico.com shows 2 examples in which a credit score could fall 105 points to 160 points after a foreclosure. Generally, a foreclosure will remain on your credit report in the tradelines section for 7 years.
Length of Time to Move After a Short Sale
If you’ve had a foreclosure notice filed, you may be able to postpone that action while the bank considers your short sale. The wait for short sale approval can be from 2 to 3 months, or longer.
Length of Time to Move After a Foreclosure
Unless prior arrangements have been made, the bank may want you to immediately vacate the property and can commence eviction proceedings.
Taxation After a Short Sale
A personal residence is exempt from mortgage debt relief on a federal level as long as the Feds continue to extend this exemption. Some states will still tax you unless you qualify for an exemption. An investor is not exempt from mortgage debt relief, subject to certain conditions.
Taxation After a Foreclosure
Same as with a short sale. Except some lenders immediately send out 1099s, even if the owner is exempt.
In closing, always obtain legal and tax advice before making a decision between a short sale or a foreclosure.
If you’re home is under water or you cant afford it anymore for whatever reason Ellen Dynov-Dell’Alba can help. Ellen is a NJ Real Estate Agent that Specializes in Short Sales and has done quite a few of them. She has a very successful history. So call her TODAY @ 718-551 8700 and let her help you get a new start in your life and sleep well at night.
About Ellen Dell'Alba - Team Leader of the Platinum Group:
Ellen is one of the most diverse realtors among the Keller Williams Realty Agency in Monmouth & Ocean Counties. Being with the company for several years, she continues to make considerable strides in becoming the best realtor she can be. Ellen is a listing specialist, along with having certifications in ABR (Accredited Buyers Representative) and BOLD. Her strategy in helping her clients buy or sell a home is fairly simple: "I do whatever it takes to make my clients 110% satisfied, and that is my personal guarantee!"
Ellen attributes her impressive 80% property sales rate to her relentless drive and work ethic. Working around busy schedules, offering multiple open houses, hosting Broker Lunches, as well as spending a considerable amount of time and money in advertising are just some of the ways Ell en makes sure her client's listings get maximum exposure.
Ellen's view when it comes to home buying is: A home is not a home because of its room dimensions or the color of the walls. It is about how you feel when you walk through the front door, and the way you can instantly envision your life unfolding there.
Ellen resides in Ocean County, NJ with her husband and five children.
"I appreciate the opportunity to earn your business and look forward making your experience buying or selling a pleasant one. Invite me in and let me show you what your home is worth and how I can get you top dollar!" - Ellen Dell'Alba
Real estate market data for Jackson, NJ provided by Ellen Dy
"Ellen was absolutely fantastic to work with. My wife and I were first time homebuyers and she made the process so easy and was invaluable to us. Ellen was with us every step of the way as we navigated through the entire homebuying process. She really made us feel that we were her first priority and was extremely responsive to our needs. We would absolutely recommend Ellen to anyone looking to purchase a home in New Jersey"