Short Sale VS Foreclosure—Differences and consequences

 

There are so many misconceptions of what a short sale is and why it benefits you as a homeowner. You may have heard about a bad experience or only have limited information about what a short sale really is. In this article I want to talk to you about why a short sale CAN be your best option and the differences between a short sale and a foreclosure.

 

Your behind on your mortgage and you are struggling financially. It can be for a number of reasons, but you are now faced with foreclosure and you walk away from the home. A lot of people who are facing foreclosure think this is the end for them and they have tried so many things to stay on track. They have either tried a loan modification that failed, or borrowed money to help stay on track. Either way, they are at this point of no return and they just walk away from the property. When you walk away from your property and let the bank foreclose it is more than just affecting your bad credit. Some of the consequences are:

 

     Finding a new home? — It will take you 10 years to be able to purchase a home again if you have a foreclosure on your record. It also would be difficult to find a landlord that will look beyond the foreclosure. Since they see that the potential tenant hasn’t paid housing bills in months and walked away from their own home.

A lot of the times they will require a much larger down payment or will not take the risk. You may even have to double the required deposit to even get considered.

    Obtaining a new job– A lot more employers are now doing credit checks as they want to see how responsible the employee is and this can impact there future employment. It might be good to prepare for a potential employer an explanation.

 Taxes—this is a big one. If your home is foreclosed the bank will 1099 you for the difference. Anytime you walk away from a debt that you owe it is considered income by the IRS. You will have to report this income on your taxes. This amount is the amount of the mortgage that the lender was never able to recover from the sale of your property.

 

Now let’s compare this with a short sale.

A short sale keeps you in the home longer while we work the short sale. Once completed successfully your bank will release an approval for the short pay off of your home. What does this mean for you?

 No money out of pocket—when you do a short sale you are never paying any money out of pocket to your realtor, towards closing costs, or the sale of the home. Your lender will cover all these costs even if you have multiple liens, judgments, past due fees, all of that is negotiated with the bank.

   Credit saved- When you do a short sale you will not have the foreclosure on your record following you around. You can easily rebuild your credit from missed payments and get back on track. After doing a short sale you will able to own another home as soon as 2 years if you are diligent about improving your credit score.

  Seller incentive to move from your lender—when you do a Short sale the government has a program called HAFA relocation assistance. You can receive compensation to move as long as you are still vacating the property. Most of our homeowners are receiving $3k from the HAFA program that will help you with all the moving costs. Also the banks are starting to do “Seller incentives” for the borrowers to avoid foreclosure and to entice homeowners to choose a short sale over allowing the home to foreclose. You as a borrower can now receive up to BOTH incentives just for doing the short sale!

 

 Those are just a couple of examples of how a short sale can benefit you when you are in a financial hardship and you are facing foreclosure. DON’T WALK AWAY! We can help at NO cost to you. If you have any questions of whether you qualify for a short sale give us a call! We would be happy to assist you 972-342-0011

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