I’ve been asked over and over why people should short sale the property as opposed
to just living in it till the bank finally forecloses. We’ll the truth be told,
the banks are allowing people to live in the property for nearly two years
before they even decide to put you out. In one rare instance, my partner Steve
told me that he just spoke to a woman that was in the house 23 months before
she even received an NOD, which happned to be a Bank of America.
But will all the incentives that the banks are giving
you might as well just take the relocation money and play it safe, because the
possibility of buying another home at a lower price is just on the horizon. So
I took a moment to outline the reasons that short sale makes sense.
Avoid The Foreclosure Stigma – Homeowners
will always have to disclose that they had a foreclosure on any mortgage
application and (many job applications) that they submit in the future.
Foreclosure is asked about specifically in credit inquiries. There is no
seven-year time limit on this term.
Protect Credit Score – Foreclosure
typically lowers all credit scores by 300 points , as opposed to Short Sale
which is about 50-100 points
Improve Eligibility for a Government Insured Loan –
Homeowners will NOT be eligible for a government insured loan for
5-7 years. But with a Short Sale that restriction is reduced to TWO years.
Avoid a Deficiency Judgment - Lenders can
seek a deficiency judgment and collect any amount they do not recover at point
of sale. California Code of Civil Procedure Section 580e prohibits any lender
from rendering a judgment against a homeowner who executes a Short Sale
Protect Employment Prospects – Many
employers run credit checks on prospective employees. Foreclosure is one of the
top items that will put a potential new hire, or even current employee, in
jeopardy of not being hired. It will put any security clearance at risk of loss or suspension.