| |
| |
| |
| 00 |
 |
 |
| Losing your home to foreclosure
due to an inability to keep up with your monthly mortgage
payments is one of life's most unpleasant experiences.
It is also an event that keeps on affecting you long
after your home is history by devastating your credit
score. Regrettably, most people cannot be 100% sure
that they will remain safe from foreclosure because
they can't foresee the unexpected. Occurrences such
as serious illness, a major accident, divorce or job
loss can happen to anyone. So it's a good idea to
understand the available alternatives should the worst
occur. |
| |
 |
| The inevitable result of
a foreclosure is the lender taking your house. Not
only will you lose your house, but the lender can
get a judgment against you for the arrearages you
owe plus his costs for the foreclosure action. If
that isn't enough, your credit report will be in terminal
condition for many years to come, worsening an already
bad financial situation and making it very difficult
to obtain any other kind of credit. There is no upside
to foreclosure. It should be avoided at all costs. |
| |
 |
| A short sale is a popular
option for homeowners mired down with financial problems.
In this case, you would sell your home for less than
what you owe your lender; the biggest problem you
will face is getting your lender to agree to a short
sale. In many situations, they will not. Experts advise
pursuing this option the minute you realize that you
are falling behind in your payments and most likely
won't be able to catch up. The longer you wait and
the greater the amount you are in arrears, the less
likely it becomes that your lender will even be willing
to discuss a short sale. This can be a complicated
and frustrating process, but is a much better alternative
than foreclosure. We
will help you deal with your bank every step of the
way! |
| |
 |
While a short sale will
save you from foreclosure, it will also have a negative
effect on your credit score, frequently lowering it
by as much as 200 points. This can be overcome more
quickly than the black mark of a foreclosure, especially
if you manage to retain one or two credit cards and
keep them current
You may be eligible to buy a home with an institutional
loan backed by Fannie Mae or Freddie Mac more quickly
than you would if it went into foreclosure.
Lenders encourage short sales over foreclosures because
they generally net more from them, since foreclosures
incur additional marketing, legal, processing and
carrying costs. Borrowers can be considered for loans
following a short sale aftter 24 months, if the sale
was caused by extenuating circumstances outside of
a borrowers' control, or 48 months if it was the result
of financial mismanagement on the borrower's part,
As for your tax situation: because of the Mortgage
Forgiveness Debt Relief Act of 2007 and the recently
passed Emergency Economic Stabilization Act, you can
exclude up to $2 million of income ($1 million if
married filing separately) from debt that's discharged
through mortgage restructuring, or that's forgiven
in connection with foreclosure, for the years 2007
through 2012. The exclusion must be connected with
a decline in the home's value or the taxpayer's financial
condition, and only applies to a principal residence,
not investment properties. You can claim relief on
your principal residence through IRS form 982. However,
Mike Martin, a financial consultant and tax advisor
in Independence, Mo., notes that there may be other
provisions in the law that can help you: For instance,
if you are insolvent when your debt is cancelled,
some or all of that debt may not be taxable. |
| |
 |
If a consumer is going
to have a Foreclosure or Short Sale in their future,the
most important item they need to focus on is their
credit score. This one action item can save them thousands
of dollars in future payments on their car, credit
cards, and future homes.
After the Foreclosure or Short Sale, there are many
things that consumers need to do. For example, re-establish
credit from the beginning. Relying on their previous
credit record will not work, even though other accounts
had no late payments. Mistakenly, many Americans wipe
their hands clean from credit once they have a Foreclosure;
they feel that "credit got me into this mess, I need
to stay away." This is the worst approach for a healthy
financial future.
By re-establishing credit the proper way, a consumer's
credit score can be considered "excellent" (above
720) 4-5 years sooner than having the Foreclosure
or Short Sale fall off their credit report. After
a Foreclosure or a Short Sale, a consumer should re-establish
credit with three new credit cards and a car loan.
It is best to apply for these credit cards all at
the same time so that any impact to your credit report
happens once and not on numerous occasions. A negative
financial situation and poor credit score can make
it very difficult to obtain any other kind of credit
and if you can get credit it will be at significantly
higher rates. |
| |
 |
| You're working overtime
and haven't missed a mortgage payment, but your personal
debt increases every month. You try to call your lender
to discuss a short sale based on a realtor's opinion
that you can't sell your home for what you owe given
current market conditions. Unfortunately some lenders
will not refer you to their short sale help department
until you are at least two months late. We can help
you communicate with your bank so you know all of
your options. |
| |
 |
| A short sale, on the face
of it, sounds like a real boon for the buyer. Through
a real estate short sale, the buyer can land a property
for less than current market value. A buyer should
be ready, though, for what might be a drawn-out and
arduous process. The lender may dither and vacillate
until the last minute as to whether to approve the
short sale. The buyer should come armed with comparable
values from the neighborhood in case there's a need
to negotiate the process. This isn't something that
can be done with a conversation or a handshake; you'll
need hard documentation to back up your offer. It's
best to locate an agent who specializes in short sales
in real estate. |
| |
 |
| A short sale should be
considered as a last gasp before foreclosure. As much
as a lender doesn't like having a foreclosed property
on their rolls, they don't like short sales much better.
They generally will not consider a homeowner who has
a chance of making payments; they're mainly looking
at the seller's financial situation. Something like
a layoff, short-term disability or maternity leave
will leave the door open for the borrower to get back
up on payments again, and a bank will be less likely
to green-light the short sale. Second mortgages are
likely to complicate the picture even more. Make sure
you have all your ducks in a row (including pay stubs
and bank statements), get any agreements in writing
and look into tax and credit consequences. |
| |
| |
|
|
|
|
| |
|
|
Property is
sold and lender accepts proceeds
as payment in full |
vs. |
Lender takes
title and forces sale of the property |
| |
|
|
| |
|
|
You may be release
from any deficiency judgment liens
filed against you |
vs. |
Lender has the
ability to file a deficiency judgment
against you and any other property
you may own |
| |
|
|
| |
|
|
No foreclosure
reported to credit bureau |
vs. |
A foreclosure
will be reported to
your credit bureau |
| |
|
|
| |
|
|
| Reflects
on your credit report for
1 – 1 1/2 years |
vs. |
Reflects negatively
on your credit report for 3 –
5 years |
| |
|
|
| |
|
|
FICO score may
drop between
75 – 125 points |
vs. |
FICO score may
drop between
200 – 280 points |
| |
|
|
|
|
| |
| |
| Effectively negotiating
a Short Sale requires knowledge, skill, and is very
time consuming. As a homeowner in financial distress,
our service allows you to use your time wisely and
not spend hours upon hours on the phone communicating
with your mortgage company or bank. By allowing Short
Sale and Marketing, Inc. assist you, we will work
with your mortgage company or bank and completley
negotiate and market your Short Sale listing. |
| |
|
|
|
