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Short Sale vs Foreclosure

December 26, 2012 By Rick Fuller

Short Sale vs. Foreclosure

 

What is the difference between a short sale vs. foreclosure?  That is the question on the mind of many Homeowners especially in communities like Antioch, Ca and through out  Contra Costa County where home values have declined significantly in recent years.  For example, in Antioch home values have declined by over 50% compared to  just a few years ago.   Check your current homes value.   This blog will focus on a few of the differences with a short sale vs. foreclosure

antioch median sales prices

So what is the major difference between a short sale vs. foreclosure?    Lets compare…

Credit:  Both a short sale and a foreclosure will  impact your credit  however a foreclosure may have a greater negative impact on your FICO score as compared to a short sale with no deficiency balance, according to the FICO Banking Analytic s Blog.

In our experience, it is also much easier to obtain future financing, employment, or future housing without the words foreclosure on your credit report.  When a short sale is completed it is NOT reported as a foreclosure therefore a short sale will keep the word “foreclosure” off of your credit report.

Personal Liability:  Most homeowners believe and some Real Estate “Professionals” will say if a home forecloses they are released from the Mortgage.  This may be true in some situations but NOT in all situations especially when a 2nd mortgage/junior lien is involved.  Unfortunately too many  homeowners have learned after the property foreclosed that they remain liable for the debt.  The bank or a collections company is now contacting them to collect on the debt they thought would be forgiven when the home foreclosed.  Now they no longer own the home and yet remain liable for the mortgage.

The approved short sale can be very different on a property with one to four residential units, Homeowners generally will not be liable for the difference according to California Code of Civ. Proc. section 580e   Certain exceptions may apply for those who commit fraud or bad faith waste (intentional damage to the property).

Time Frame:  How long does it take to short sale or for a home to foreclose?   Although this question is dependent on many factors and  for more information you can read my blog: How long does it take to short sale?  It is important to note as we compare short sale vs. foreclosure timing that a homeowner has far more control of a short sale close date than they do a foreclosure sale date.

The short sale close date is  mutually agreed upon by the Buyer and the Seller and approved by the short sale lenders involved.  Once a foreclosure has occurred there can be an eviction process initiated with hard dates a homeowner may be forced to adhere to.  In my experience, generally the transition to another home (Search properties for lease) is far easier and less stressful with a short sale than a foreclosure.  It is generally a good idea for a homeowner to remain in the home and maintain the home for as long as possible prior to the short sale or foreclosure sale date occurring.

Relocation Assistance:  In many cases there may be relocation assistance available with either the Short Sale or Foreclosure.  Lets look at both…

  • Short Sale Relocation Assistance:   HAFA provides $3,000.  HAFA is the Making Homes Affordable Short Sale Program providing homeowners $3,000 at close of escrow upon a HAFA approved short sale.  Check HAFA eligibility.
  • Short Sale Incentive:  Some lenders (Bank of America, Chase, and Wells Fargo)  have become more assertive and have provided certain borrowers with as much as $47,000 short sale incentive.  Not everyone with a Bank of America, Chase, and/or Wells Fargo loan qualifies for this form of short sale incentive.  For more information about the short sale incentives available and a free HAFA brochure contact me.
  • Foreclosure Relocation Assistance (Cash for Keys) may be available from Banks that have concluded a Foreclosure or Third Party Investor who purchase the property at the foreclosure auction (Trustee Sale)  .  It is not always offered however can be requested.  In my experience,  it ranges from $500 to $10,000 and averages about $2,000 however it can vary depending on the Bank, the Third Party Investor, the value of the property, and how quick you can move.  Usually vacating the property in Two Weeks will receive a higher cash for keys offer than a Two Months.
The California Department of Real Estate has written excellent consumer protection articles about cash for keys and different relocation assistance.   Feel free to contact me and I will email them to you or visit our office at 5079 Lone Tree Way Antioch, Ca 94531.

 

 

Disclaimer: Readers with credit, legal and tax questions are advised to see the advice of an attorney or tax professional. The information above is not to be considered legal and or tax advice. Credit is hereby given for many of the links, information and resources to Making Homes Affordable.gov, California Department of Real Estate, Fannie Mae, Freddie Mac, HUD, CAR.

Filed Under: Antioch Community Blog, Antioch Real Estate Blog, Brentwood Community Blog, Discovery Bay Community Blog, Linda's Short Sale Blog, Oakley Community Blog, Payment Relief Options Blog, Realtor Rick Blog

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Rick Fuller Inc., REALTORS®
Antioch Real Estate Agents
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5079 Lone Tree Way
Antioch, Ca 94531
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