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Avoid Foreclosures - 

A Short Sales is a Better Alternative

 

Many people who are having problems making their mortgage payment feel there is no hope – that foreclosure is the only possible solution to their situation.  This can lead to making decisions that will only make matters worse – like avoiding a conversation with the bank, or abandoning the house altogether.  There is an alternative – the short sale.

 

 

 

 

 

 

May 1, 2009

 

In a short sale situation, your realtor will work with your mortgage company and create a plan of action to sell your home and pay off a large percentage of your mortgage.  To understand how it helps you, the seller, let’s look at 3 different scenarios:

 

A Healthy Financial Situation

 For  a typical homeowner with good steady income, their  situation may look like this:

  • Mortgage payments are made on time

  • The principal of the loan goes down

  • The value of the home increase

  • The equity in the home increases

  • Improvements and upgrades might be made to the house

  • The homeowner’s credit score increases, as long as you pay all your bills on time

  • The homeowner can sell their home and make a profit

  • The profit can be used to buy a bigger home

  • Everybody wins – seller makes a profit and the loan is paid off.

 

Foreclosures

In a foreclosure situation, here is what typically happens.

  • Several mortgage payments are missed

  • Principal remains the same or increases, depending on late fees and fines

  • The value of the home decreases

  • There is no equity built up

  • The house is usually neglected or destroyed

  • The homeowner’s credit score can be lowered 250-300 for over 3 years

  • A foreclosure stays on credit history for 10 years

  • A deficiency judgment is placed on the homeowner for the remainder of the mortgage

  • The bank controls the sale process of the house

  • Everybody looses – the homeowner looses their home and good credit, the bank only gets a small portion of their loan back once the house is sold

Also, Foreclosures have more serious consequences that people don’t consider:

  • It can effect your security clearance, and this is crucial for people in the military or law enforcement

  • Your current employment may be in jeopardy, as your current employer can reassign or release you.

  • Any future employment may be in jeopardy as well, as employers check the credit history of future prospects

Short Sales

In a short sale scenario, your Realtor can put the property on the market.

  • Realtors can work with the bank to come up with a reasonable amount for a payoff, in conjunction with the sale of your home at market value.

  • The home value may decrease slightly due to the condition and the market

  • There is no equity – no money goes to the seller at closing

  • The house may need some repairs

  • The seller’s credit score lowered around 50 points for app. 12 to 18 months, mainly due to missed mortgage payments.

  • A short sale is not currently reported on credit history

  • The bank may waive or lower any deficiency judgment against the seller

  • The seller controls the sales process

  • A short sale does not challenge the seller’s security clearance, current or future employment

  • Everybody compromises – the bank takes a partial payment, the seller sells his home with no profit but does not ruin his credit

If you are considering a short sale, call Will Schirmer, who is a Certified Distressed Property Expert  (CDPE) at 215-822-4884 or 215-822-8200.