How Foreclosure And Short Sale Affect Your Credit

"Credit is often one’s first concern when they face foreclosure or consider a short sale. That’s perfectly understandable considering the importance we put on credit these days, from getting a credit card to buying a home or car. And when hard times strike, it’s only natural for a homeowner to want to save his credit. But how do you know how you’re your credit will suffer? Below are some of the most common questions on foreclosure and short sale credit impact, and what you can do about them.


How Will It Affect My Credit Score?

In either short sale or foreclosure, the reduction in credit score is a combination of your default and the sale itself. Generally, the losses are much lower in a short sale—some 100 to 300 points (sometimes less) compared to as much as 400 in a foreclosure. The further behind you are at the time of the foreclosure or short sale, the more your credit score will drop as a result.
How Long Does It Stay On Record?

In most states, a foreclosure stays on your credit report for up to ten years. Short sales can stay as little as two years or as much as seven, depending on your lender’s policies and the terms of the sale. One advantage to short sales is that you can negotiate with your lender as to how it will be reported, and if you get a good deal, you may even get them to remove the record sooner.

How Soon Can I Buy A New Home?
The law varies by state, but generally, you have to wait around 5 years after a foreclosure before you can buy a new home. Short sales have a wait time of two to three years, depending on who owns your mortgage. Fannie Mae allows you to buy a home after two years with a certain required down payment; this requirement is lowered the longer you wait to buy. If you did not have a 60-day default when you sold off your home, you can even buy a home immediately afterwords.


How Will It Affect Future Credit?

A foreclosure usually comes with a disclosure agreement which requires you to mention the event when you apply for another mortgage. Mortgage applications usually have a section where you have to indicate whether or not you’ve gone through a foreclosure or similar transactions, and this will affect the lender’s assessment. This happens less frequently in a short sale."

Short Sales and REOs: What’s The Difference?

"The troubled real estate market has led to an influx of distressed homes, which now make up as much as half of the inventory in some areas. Thanks to the attractive prices being offered, many buyers are snapping up homes they would otherwise not have considered. Unfortunately, not many of them really understand what they’re getting into. For instance, what’s the difference between a short sale and an REO—the two most popular types of distressed homes today? Here’s a quick guide to help you better understand your choices.



Short Sales and REOs

A bank short sale is a home that’s priced below the seller’s mortgage balance, because the balance exceeds its current market value. Banks agree to short sales because the only alternative is often foreclosure, which will cost them even more. REOs, which stand for real estate-owned, are homes that have gone into foreclosure but have been repossessed by the bank because they failed to get bids at the auction. Both are sold at significant cuts and are listed on the MLS just like non-distressed homes.

Selling Prices

A short sale is limited by the seller’s outstanding balance; it cannot be priced more than what is owed. Generally, a bank short sale sells for 85% to 95% of the market value, although some can sell for as low as 60%. REOs are priced according to market values as well, but banks can also take into account any repairs they’ve made prior to listing. Since banks sell REOs solely to get the property off their books, they are priced to sell fast and often offer good deals compared to a bank short sale.

Buying Process


This is probably the biggest difference between an REO and a short sale. In a short sale, the buyer makes an offer to the seller, but it’s forwarded for the bank for approval. The lender has the final word on whether or not the bank short sale can push through. An REO, on the other hand, is sold much like a regular sale, with the bank acting as the seller. They usually take faster because the bank is much more willing to sell.
Where To Find Homes


One can find a bank short sale or REO on the MLS and other mainstream listings, but they can be hard to distinguish from regular homes. Laws have yet to be passed requiring the identification of short sales and REOs. Until then, the best way to find a bank short sale is to look for wording that says a “third party,” meaning the bank, has to approve your offer. REOs can also be found in banks’ private listings, which are usually available on their websites."

5 Facts About Bank Short Sales

"Bank short sales have been well publicized as a way out of foreclosure, or even a shortcut to financial stability. But while it has helped thousands of homeowners, the bank short sale process isn’t as simple as it seems. Before taking the plunge, it’s important to know how bank short sales work and what results to expect. Here are some facts every seller should know before opting for a bank short sale.

Buyers Can Still Back Out

Bank short sale buyers are not required to commit to any properties. So even if you’ve taken their offer to your lender, they can still walk out of the sale if they find a better deal elsewhere. The best you can do is show your willingness to sell your home and complete your documents so that the sale moves forward faster.

Short Sales Affect Your Credit

Credit scores will fall after a short sale, both as a result of missed payments and the bank short sale itself. The good news is that it’s much less damaging than a foreclosure. Bank short sales can take 80 to 100 points off your credit score, while foreclosures can slash it by as much as 400.
You May Still Owe Money Later

After a bank short sale, there’s a difference between the amount the home sold for and the balance you still owe. Your lender will either forgive this amount or go after it in a deficiency claim. Most will only do the latter if you have any assets you can pay it with. More commonly, they will simply give you a 1099 form stating the amount of canceled debt. The IRS will record this as income and impose the appropriate taxes.
You Can Get Tax Help

If you’re worried about the tax consequences of a bank short sale, you may be covered by the Mortgage Debt Relief Act of 2007. This exempts short sale sellers from any tax dues on forgiven debt for incomes of up to $2 million. You are also protected from taxes on bank short sales if you were insolvent at the time of the sale.



You May Have To Wait To Buy A Home

Most bank short sales have a 2-year waiting period before the borrower can get a new mortgage. For Fannie Mae mortgages, the longer you wait, the lower the minimum down payment will be. However, if you were not in default at the time of the bank short sale, you can apply for a new mortgage immediately after closing."

The RPA-CA (California Association of Realtors Residential Purchase Agreement) generally allows you to back out of a short sale deal, provided you didn’t sign any addenda with the seller or his bank. Under the RPA-CA, you get to keep your contingencies—meaning you can cancel the contract as you please—unless you remove them through another agreement, such as a contingency removal or cancellation form.
What Happens To Your Deposit?

If you’ve already made an earnest money deposit, backing out under regular terms will allow you to get it back. It’s only a matter of the short sale seller giving you a refund. As long as the contingencies haven’t been removed, the state’s Notice to Perform and Cancellation forms assures that buyers don’t lose anything in the process.

Why Back Out?

One of the most common reasons to back out of a short sale is title problems. If this is the case, remember that title burdens, such as unpaid homeowner’s association dues, are usually paid and cleared at closing. At this time, the lender usually lets the escrow company settle any fees due and pay other lien holders, if there are any. The short sale will only close once all liens have been cleared from the home. For any other reasons, such as the home’s physical condition, it’s likely that the short sale seller will try to negotiate repair costs before letting you cancel.

When Should You Back Out?

Backing out of a short sale is pretty simple, but it can complicate things in the long run and should still be avoided. Before making any deals, make sure to get a good look at the home, from the physical condition to the circumstances surrounding the mortgage and default. A good short sale agent can help you find useful information on any short sale home, such as how many lenders there are and why the seller wants to get rid of it. If you do decide to back out, ask yourself why and consider alternatives before giving it up."

How A Short Sale Agent Can Help You

Many struggling homeowners have, at one point, considered taking matters into their own hands and pursuing a short sale on their own. After all, it’s hard to see the sense in paying a third party when you’re already about to lose your home. But a short sale agent is often worth every bit you pay them, sometimes more. Here’s how you can get better short sale results with an agent and how you can build a good relationship with them.

Play By The Rules

A Short Sale agent will know local laws better and help you use them to your advantage. For example, a short sale under the government program HAFA (Home Affordable Foreclosure Alternatives) isn’t the same as lenders’ private programs. Depending on your state, there may be rules on how long a short sale can take, how much can be forgiven, or how borrowers are assessed. A short sale agent can help you stay in line and avoid problems caused by non-compliance.

Know The Market

Short Sale Sellers seldom know how the market works, and this can lead to bad decisions. You need at least a working knowledge of your city’s real estate market and home values to make a strong case for your lender. With a short sale agent, you can do your research and use the information wisely. They can help you negotiate the short sale with your bank and back up your case with solid facts.

Get Your Home Seen And Sold

The primary role of a short sale agent is to list and market your home. You can do this on your own, of course, but an agent who’s been in the short sale business for a while will have useful connections that can help the sale along. Besides putting your home on the MLS, a short sale agent will get word around to buyers and their agents, help you prepare the home for viewing, and maybe schedule an open house.

Read Before You Sign

Real estate contracts are always complicated, and that’s even more so in a short sale. A short sale agent can explain each part of the contract to you and make sure you know what the terms are. If there are any vague parts, you can clear it up before proceeding with the short sale. With a short sale agent, you don’t just sell your home and get back on track sooner—you also get valuable tools that you can use in the long run.

Short Sale and Foreclosure Consequences to Look Out For?

Short sales and foreclosures are generally regarded as two different options for struggling homeowners. But they are also similar in the sense that they always have a negative impact on the borrower; it’s more a question of what’s less damaging. Whether you choose a short sale or let the bank foreclose, there are consequences you need to take into account—your finances, your credit, your chances of finding another home. This guide offers a look at some of the most common short sale and foreclosure consequences and how you can deal with them.

Credit scores

Most borrowers are probably more concerned about post-short sale or foreclosure credit than anything else. After all, credit is crucial to pretty much any transaction these days. The fact is that your credit will certainly suffer whether it’s a Short Sale and Foreclosure—it’s mostly a matter of minimizing the damage. With a short sale, you stand to lose anywhere from 100 to 300 points, depending on how far behind you were at the time. A foreclosure can slash up to 400 points off your score. So if you want to maintain a decent score, a short sale is definitely the better choice.

Tax consequences

You may figure there’s not much left to lose when you’ve sold off your home, but many borrowers are surprised at the short sale and foreclosure tax implications. Technically, since the lender forgives part of your balance in a foreclosure or Short Sale, the difference can be considered capital income and is therefore subject to tax. There are laws that keep short sale and foreclosure sellers from being taxed, such as the Mortgage Debt Relief Act of 2007, but each state has its own rules and exceptions—and it’s up to you to know where you fit in.

Future mortgages

Chances are you’re considering buying a new home after selling off your old one. But short sale and foreclosure rules set different wait times before you can take out a new mortgage. A short sale usually entails a two-year wait, while a foreclosure can take five years or more. An exception is when you do a short sale but were not more than 60 days behind on your mortgage—it’s rare, but if this is the case, the wait time does not apply. Experts recommend, however, that borrowers wait until their credit has recovered enough to get rates they can more comfortably afford.

What will happen to Credit Score after doing short sale.

This is a very common question asked all the time as far as what effect it will have, after doing short sale on your record will affect your credit score and credit report. Let us first understand what a short sale is before identifying its effect on our credit. A short sale happens when a lender agrees to accept less than the amount owed against the home because there is not enough equity to sell and pay all costs of sale.

A short sale in general will affect your credit report less than a full foreclosure or deed in lieu of foreclosure. You can have a "settlement paid in full" negotiated with the lender, and obviously this will show better than simply doing nothing. No one may know exactly to perfection what the difference is in points on how your credit score would be affected whether you do a short sale vs. a foreclosure. Experts say that the damage that the foreclosure do to your credit is the same with what short sale on credit can do. This is because a short sale is part of the definition of foreclosure. For credit bureaus and lenders, this is a serious delinquency. If you are behind in payments and you owe too much on the house, what choices you really have anyways, if you do have any other choice, it is still better to choose for a short sale for various reasons. First, you can benefit from the proceeds even if it is not much. Another, you will be able to avail of a mortgage loan after two years, compare that to the five years you have to wait if your property is foreclosed. In addition, this helps the lenders too. Short sales can minimize the losses that the lenders will endure.

If you have lots of money, assets, reserves, and a high net worth and you just don’t feel like making payments or feel like paying down your principle balance, your lender won’t want to do a short sale. They will first want to get financial info from you, and a written hardship letter. This will make it quite clear to the bank that your only option is some help from the lender. This is where you see a seller that has a property listed on the MLS reading as "subject to bank approval". A full foreclosure can stay on your credit for up to 7 years. Freddie Mac recently passes some new laws for their company that would not allow some borrowers to finance a home for up to 5 years through them. This was more in the cases where people were just walking away, and didn’t have a true hardship case. Currently you can get a FHA loan where your last foreclosure was only 3 years ago. That’s how it is in the current market. You can always just go buy on a contract for deed, get into a rent to own, or rent a property while you are improving your credit. As a general rule you can still get loans with 30 day late payment on your record, it becomes less likely with a 60 day late, and very hard with 90 day late mortgage payment, etc.

It is better to consult your attorney and your accountant when you have to deal with selling your property in Short sale process. They can give you a good idea on how your credit score will be affected by doing a short sale.

For More Information Visit: - http://www.shortsalecredit.net

Learn the basics of short sale.

You may have heard that investing in short sales can be very profitable, but find yourself wondering what is short sale investing and how exactly it can benefit you If you want to move into short sales, it is important to keep both eyes open and consider all aspects of the business. So how exactly can you pull ahead and make the real profits when everyone else is fighting to do the same?

Using a short sale strategy, many times they are able to stop the foreclosure process through the multiple strategies short sale houses has available to them. Most short sale houses have cash buyers who will close in 10 days; this prevents a foreclosure from showing up on your record, prevents further damaging of your credit.

Once you learn the basics of buying a short sale home you'll find that taking advantage of these pre foreclosures is a great way to make money in real estate investing. It can be a confusing process to muddle through your first few times.


1) Find out the laws that pertain to foreclosures and short sales in your state.
2) Banks won't negotiate until in default.
3) Call loss and mitigation department. Speak to the person in charge of your default and keep in contact with this person once a week.
4) Ask for a short sale packet...sends the info, they ask for
5) You negotiate ONLY! Not your Realtor...you put the offer in and let the bank counter back, don’t let the Realtor control the listing.
6) Listing with a Realtor isn't always good but the bank will take you serious if it's on the…...pay the fee to list and mention it's a short sale!
7) Don’t expect any offers until a month before court....find out the laws in your state.
know your LAWS...in California non-judicial they can't come after you if you have a conventional loan...equity YES for the difference
8) PRIVATE sale is the best in California...try to short.
9) Most banks won't short sell because they have insurance with the mortgage companies and the insurance will cover theirs losses...that's why they reject loans but as the rates grow higher less want to carry the homes.

The key is to work with a real estate agent who specializes in the area of town you are looking in, and is connected to the short sale market. But be careful as many agents claim they know short sales, but few actually do.

THE SHORT SALE PROCESS

As we know short sale occurs when the lender agrees to discount a loan balance and accept less than the total amount due incident to the sale of a home due to financial hardship and I all ready discussed about short sales in my previous posts. So i will talk about the short sale process?

Short Sale Process: - Once homeowners find themselves in a circumstance where their home is worth less than the mortgage balance this is just the beginning of the process to be contacting the lender to see if the property qualifies for a short sale. If the owner/borrower has other assets which would enable them to pay off their mortgage, then the lender will not approve the short sale and could get a deficiency judgment against the homeowner for the difference of the amount owed on the loan and the sale price of the home. The first and most practical step would be to seek the assistance of a competent real estate short sale agent who should be specializes in bank short sales and the short sale process. While each lender has their own specific requirements there is a consistency in the nature and type of documentation that can be expected. Working with an experienced shortsalesafe.com is good move in getting your short sale approved with no deficiency judgment.

Hardship Statement is a written statement which describes for the lender what has changed making it difficult/impossible for the homeowners to continue paying their current mortgage, due to lost a job or had a significant decrease in income, was hospitalized or had some other unexpected illness or medical emergency contributing to their problems.

Statement of Income will require a hardship letter and proof of the financial statement outlining all liquid assets, including savings accounts, checking accounts, money market accounts, stocks, bonds, cash and other real estate. Obviously this statement needs to be consistent with the facts outlined in the hardship statement in order for a lender to seriously consider the request.

The advantage of a short sale is that the owner can save their home from foreclosure and their credit. The seller simply walks away at the closing not owing any money on their mortgage. Of course, they have lost their equity in the property by that time.

Avoid-foreclosure..... Do a short sale..!

Short sales are the hottest thing going in the distressed-property market, and the trend is expected to get even hotter in coming weeks. While a short sale may sound appealing, it's important to understand what a short sale is, how it works and how it can affect your income and tax liability. If you do not understand the process, it could end up costing you a considerable amount of money. A short sale is a complex process, so it's best to work with a professional such as shortsalesafe.com.

If you are facing a debilitating adjustable rate mortgage interest rate increase, you are not alone. In fact, you are among the hundreds of thousands of residents who are in the same situation. If you are unable to continue paying your mortgage payments, you only have a few financial options available to resolve the situation for you and your family. You can attempt to negotiate for a loan modification, reducing your monthly financial obligation. In the event that you can still not make the mortgage payments, you can list your home for sale

A short sale is one of the many ways in which a home owner is able to prevent himself and his property from going into foreclosure. A short sale is a far less expensive process than a foreclosure and it also takes much less time to complete. Buyers of property in short sales will typically negotiate with lenders and lien holders to pay them the debt owed at discounted cost.

Therefore, if you are a buyer who plans to engage into a short sale, it would be wise to ask the opinion of a real estate short sale professional like us. We can provide you with a complete explanation of short sale and how the process works. In this way, you can be prepared to gather all the needed data to accomplish the transaction and move into your new house.

WHAT IS A SHORT SALE?

A 'Short Sale' is named based on 'shorting' a bank on the amount due on a given mortgage. Specifically, a short sale is when the bank lets a distressed homeowner, who owes more than his property is worth, settle up by paying less than the total owed.

Generally, short sales are used when the homeowner is both behind on payments and owes more than the property is worth as a way to create equity for the investor so they will purchase an otherwise non-performing asset for the bank. Many homeowners have turned to real estate short sale as a way to avoid foreclosure, especially after having unsuccessfully tried other loss mitigation options such as loan modification. With a short sale, you may not get to keep your home, but you get to avoid foreclosure and the stress that comes with it.

Short sales are difficult to pull off, requiring negotiations with many layers of bureaucracy. Frequently, the bank you are sending your payments to is not the bank that owns your loan. In fact, it may have passed through the hands of two or more banks. Therefore, not every bank will agree to a short sale, and not many people are willing to buy short sale homes. That’s why it pays to work with professionals like shortsalesafe and we will make sure you take the right steps. After all, it’s not just your home at stake—it’s also about your financial future. With good planning and a dedicated team, you can sell short sale and get your mortgage cleared—and start rebuilding your finances right away.