Blog

Short Sale vs Foreclosure

Are you facing a possible foreclosure? Do you owe your lender more than your home is worth due to the recent steep fall in housing values? You are not alone.  Resetting ARMS,  option ARMS and unsecured ARMS have not matured yet.  The issue is going to get much bigger in the coming months.

A foreclosure is one of the most onerous things you can have on your credit rating. Your credit cards are canceled and you cannot make necessary purchases. A far better alternative is a short sale.

A short sale is a legal lender approved solution designed to assist those home owners who are financially strapped to get out from under their mortgage debt. A short sale is a much better and smarter solution allowing you to get back on your feet in a shorter period of time and without the lengthy period of recovery and corresponding tarnished credit rating resulting from a foreclosure.

Generally speaking if your home is foreclosed on you will not be able to get a loan to buy another home for five to six years. With a short sale in most cases you will be able to buy another property in two to three years. In either event your credit scores are going to take a hit.

What happened? Some of us are angry, have lost health insurance, overdue bills, can’t put food on the table and have ruined retirements and may be in the midst of a divorce. Losing the family home, a distant and unimaginable nightmare just a few years ago, is a distinct possibility. The economic collapse has resulted in over 10% unemployment in Massachusetts and will continue to effect homeowners ability to pay the mortgage.  In addition the value of homes continues to trend downward sending more and more of us “underwater”, where the price of the home is worth less than is owed on the mortgage.

If you have received a notice of default from your bank keep what is happening in perspective. Remind yourself of the blessings that you do have…and then take one step at a time.

The psychological impact of a foreclosure is devastating to most individuals. Many people are in denial and thus avoid opening the mail.  However you must remain calm and open every envelope from the lender. If you know the situation is only temporary, perhaps you could ask for help from family or friends and then pay them back.  If you do only one thing, make at least one payment in a one hundred-eighty day cycle to your 2nd mortgage or any other liens. This places your debt in the creditor’s “recovery” status. Consequently creditors seek much less and charge off the rest to noncollectable debt.

Find a Realtor who is compassionate, empathic and understands. It is critical to cooperate as fully as possible completing the documentation in a timely and orderly fashion. Your Realtor should work with you while coordinating a team of professional Short Sale Specialists, Lawyers, a CPA, and a Mortgage expert. Your Realtor should also call you with updates from the lender, keeping you informed from the first until the last day when the lender agrees to accept less, the buyer receives a fair deal, and you are free to go and rebuild, renew, move on and put this awful time behind you. You can do it.