Short sale or let go to 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, Oakley, Pittsburg and the surrounding communities through out Contra Costa County where home values have declined significantly in recent years. For example, Antioch home values have declined by over 50% compared to just a few years ago. What is your home worth today? This blog will focus on a few of the differences with a short sale vs. foreclosure
So lets see what the major differences are…
Your credit impact: Both a short sale and a foreclosure will have an impact your credit. However, a foreclosure can have a much greater impact to your fico score. We all know how important credit is in this day and age. That is why this is an important factor of the decision process.
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 person completes a short sale it is usually reported as “settled for less than full balance”. Altough this is a negative item on a credit report it is much better than the word “foreclosure” which is a major stigma to some viewing your report.
Your Personal Liability: Has a friend or neighbor ever told you that letting the house go to foreclosure will totally release you from any liability? This may be true in some situations but NOT in all situations especially when a 2nd mortgage/junior lien is involved. Unfortunately many have made the decision to let a home go only to find out that much of the liability still follows them. In some cases bank and collection companies can continue to try to collect on the debt even after foreclosure. Many have found themselves in a situation where they do not own the home anymore yet still owe the debt.
A 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 There are certain exceptions. For example if a person commits fraud.
Control: Can you stay in a home longer with a short sale? This depends on different factors such as how many payments you are behind and who the bank is? For more information you can read my blog Short sale timeline With that said, a person doing a short sale has far more control over when they have to move out.
The close of escrow date is agreed upon by all parties involved and is approved by the short sale lender. Once a house is foreclosed on it is too late. The home is no longer yours and the bank can start an eviction process to have you forcefully removed if you do not move willingly In my experience, moving to another home is far easier with a short sale. A homeowner can continue to stay in the home during the short sale process and will know the exact date that they need to be out.
Money for you to short sale: There can be relocation assistance provided by the bank whether it is a short sale or foreclosure.
– HAFA (Home affordable foreclosure alternative) – This program allows for a $3,000 payment to a seller upon successful closing of a short sale. A seller needs to qualify for it and the closing needs to take place for the seller to receive payment Check HAFA eligibility.
– Different bank incentives: Some of the big lenders such as Bank of America, Chase, and Wells Fargo have really ramped up their efforts and given some sellers as much as $47,000 short sale incentive. Not everyone qualifies for this incentive. It is very selective and depends on many different internal factors at the bank. We can provide you with free HAFA brochures contact me.
What if the house has foreclosed? : The banks sometimes practice what is called cash for keys. They will also give a certain amount for a seller to vacate when still occupying a foreclosed property. In this option the bank is generally not as forgiving with timelines and will want the seller out as soon as possible.
We have many brochures that can help with your decision and we offer free 30 minute consultations to go over your specific situation. The worst thing is to do nothing. Feel free to contact me or visit our office at 5079 Lone Tree Way Antioch, Ca 94531.
Juan Banuelos is a Certified Distressed Property Expert . We offer free 30 minute consultations on your individual situation. You can call him at (925) 783-9516 or email him here.