Why A Short Sale?
Advantages of Short Sales
Foreclosure should be the last resort, when all other options fail. Many homeowners can successfully complete a short sale if they:
- Begin as soon as they are about to go delinquent on the loan
- Complete the necessary paperwork and
- Hire a competent real estate agent to handle the sale.
Be aware that some agents charge an upfront fee to take on the task of a short sale. We do not.
The primary benefits of doing a short sale are, first protecting your credit. While both a short sale and foreclosure will affect your credit, a foreclosure will greatly impact your ability to purchase a home in the future.
Fannie Mae has announced changes that went into effect August 1st, 2008. You cannot purchase a home under the following guidelines and time frames using Fannie Mae Conventional financing:
- Pre-Foreclosure (short sale of home); 2 years
- Deed in lieu of foreclosure; 4 years
People who foreclose will have the following Fannie Mae restrictions placed on them:
- 5 year time period from date of foreclosure completion in which you cannot obtain financing, after which you can finance with a minimum of 10% down and a credit score of 680
- 7 year time period from completion to finance a second home or investment property
- 7 year time period from completion to take cash out of a refinance on any property regardless of occupancy.
Additionally, some employers will not hire or retain an employee who has foreclosed on a home.
The emotional impact to a borrower who has a foreclosure cannot be underestimated. Despite the time involved in doing a short sale, there is an emotional benefit to doing the "right thing".
Also, where a homeowner has continuing liability for a loan (such as a Home Equity Line of Credit) after foreclosure, the borrower can take some measure of control and mitigate the loss with a short sale. In other words, often these can be negotiated away during a short sale.