Here are some frequently asked questions regarding short sales, foreclosure and how they impact your credit score and credit report.
“Does a short sale hurt your credit?”
“Short sales take more than 90 days, how will that affect my credit score?”
“How long does a foreclosure stay on your credit?”
“How does a foreclosure affect a persons credit score?”
“How long does a bankruptcy stay on your credit report”
“Can credit repair actually remove foreclosures from credit reports?
Homeowners short selling their home should never believe that a short sale automatically relieves them of their obligation to pay the deficient balance. What I mean by the “deficient balance” is the difference between what you owe and what your property sells for.
Dangerous Myth: “Lenders Cannot Pursue a Deficiency Judgement after a Non-Judicial Foreclosure”
Right now, I want to eliminate a common misconception regarding what people, even lawyers, have been claiming are “benefits” of allowing your property to go into foreclosure:
Bad advisor: “If you can’t get the lender to waive the difference in a short sale or deed-in-lieu of foreclosure, just have the lender foreclose on your property. In a non-judicial foreclosure, the lender won’t be able to pursue you for the difference. Although they may report a foreclosure on your credit report, at least you’ll be able to walk away owing nothing to your lender.”
Friends, this is simply not true!
People ask me all the time, “Should I keeping paying my mortgage payments if I am about to do a loan modification or a short sale?”
My answer to them is, “get the facts and trust your instincts.”
Here are the facts:
Effects of Short Sale on your Credit Report:
- 200-300 point reduction on your FICO score, depending on the borrower. I have heard of a 100 point reduction, but this should be very uncommon.
- Inability to obtain a mortgage for at least 24 months.
State by State Foreclosure Laws: Find out whether you live in a Deficiency or Anti-Deficiency State
Have you been wondering whether YOUR STATE is a DEFICIENCY or ANTI-DEFICIENCY STATE? In other words, can the lender sue you for a deficiency judgement (ie. sue place a lien against you and your assets) for the difference between what you owe and what the property sells for at a foreclosure auction?
There are tons of websites out there with so called “lists” of deficiency and anti-deficiency states that are either inaccurate or fail to explain the specifics on exactly how, where and when homeowners are sued for deficiency judgements.
Available now are state by state foreclosure laws provided by one of our trusted colleagues. He is an Attorney at Law. Find out whether you live in a Deficiency or Anti-Deficiency State by navigating the site below.
Everybody should watch this documentary to understand the dynamics of short sale, loan modification and debt negotiations. This documentary outlines different types of fraud committed by lenders that have led millions and millions of homeowners into short sales, foreclosures and unmanageable debt.
Below are BACK TO BACK LETTERS sent by the same institution (Chase). The first letter is an example of terms I have personally negotiated with Chase. The 2nd letter is an example of the same lender pursuing a deficiency that they are clearly not entitled to collect. YES, IT’S COMPLETELY RIDICULOUS, but this happens all the time.
*NEW UPDATE - CHECK OUT SOME OF OUR LOAN MOD SUCCESS STORIES*
It’s been almost a year since my last post regarding Seattle loan modifications. Get ready for a new perspective.
In the last 11 months, I’ve realized that many, many homeowners out there simply do not have the capacity to negotiate their own loan modifications. Here is why:
1. They do not find HUD agencies helpful (not to say that they aren’t, but many homeowners have had this complaint)
2. They are under too much stress and end up arguing with HUD or loss mitigation (thus ruining their chances of successfully negotiating a loan mod)
3. They do not have the time to negotiate their own mods and end up going back and forth with lenders for many months.
Many of these homeowners end up turning to short sale, only to realize a couple days before the sale that they could have qualified for a loan modification. Better yet, they may have been qualified for rates better than what was originally offered.
Every homeowner who is looking to short sale their property should be asking the following question: “On a short sale, will I have to pay the bank the difference between what I owe and the final sales price of my property?” The answer to this is both yes and no. Don’t worry, I’ll make it simple for you to understand.
*UPDATE 3/13/10 Feel free to visit my new blog post regarding how to negotiate & waive short sale deficiency balances*
