This is the fourth in a series to help homeowners facing default. Many homeowners don’t realize that there are options available to them other than losing their home to their lender through foreclosure. If you have missed the previous posts, please go back and check them out.
Many of you will say, “If I’m this far underwater, why not just walk away and be done with it? The bank is going to take it anyway.” While this may sound like a plausible argument there are many reasons why that is not the best alternative.
I could go into a lot of detail as to the difference in the effect on your credit depending on the type of loan that you have but I’m going to spare you the pain. The bottom line is that your credit takes much less of a hit with a short sale vs. a foreclosure. With a foreclosure your credit score may be lowered 200 – 300 points, while with a short sale the report to the credit bureaus in most cases states that the loan is “paid as negotiated” or “paid in full, settled.” Also keep in mind that the foreclosure can remain on your credit report for 7 years or more. That’s a long time to have to answer for just walking away.
Two other important consequences of a foreclosure that most people don’t consider is the potential loss their current employment and having to pay the bank even though the bank took the home. If you have a job that requires any type of security clearance or are employed in some type of a sensitive position, possibly handling money for instance, your job may be in jeopardy. Employers have the right and are actively checking the credit regularly of all employees who are in these sensitive positions. A foreclosure in many cases is ground for immediate reassignment or termination. In addition, future job employment may be affected since employers require background and credit checks on all applicants.
In 100% of foreclosures (except in those states where there is no deficiency) the bank has the right to pursue a deficiency judgment against you for the difference between the proceeds from the sale of the property and the amount that was owed on the property. In many successful short sales it is possible to convince the lender to give up their right to pursue a deficiency judgment against the homeowner. If the bank does not grant the waiver of deficiency judgment, homes that are sold as a short sale typically sell for a higher price than those that sell as an REO and therefore that deficiency would be much less. In a foreclosure all bets are off. The lender can come back to you for the difference in what they were able to sell the property for and the amount that you owed.
Another consideration with trying to do a short sale versus letting the bank just take it back is pride. If you’re having a difficult time paying your mortgage no doubt your other bills are affected and friends and family may know that you are struggling. But what about the neighbors? Do they know your situation? Wouldn’t you rather sell your home, than for everyone to know that you lost your home when the bank foreclosed?
If you are having a difficult time paying your mortgage or facing foreclosure check out my resource website at www.IndyShortSaleQueen.com or contact me to check out your options. No one should lose their home to foreclosure; there are too many options available.
Next: Do I Qualify For a Short Sale?