The Story
I had a client call me the other day… his story was similar to many we have all heard over the last year and a half. He had been trying to sell his investment property for over two years but was very resistant to dropping the price, which he recognized was necessary to get any offer of purchase. His life savings had been depleted trying to keep current on this property and he had reached the end of the line. He was depressed, frustrated and resigned to losing the property and taking a credit “hit”. The bottom line for him was whether he should he “go to the trouble of trying for a short sale” or just “let it go to foreclosure”. He definitely wanted the easier road, which he thought would be a foreclosure. The consequences would be similar between the two . . . . right?
What do Lenders Say?
I flashed back to about two weeks prior when I was teaching a Short Sale and REO Transaction class for a local lender. The Senior Loan Officer had some material to share with us. First, she showed us actual credit reports of clients who had gone through a Short Sale. There was a “Before” and “After’ credit report for the same borrower. The Short Sale basically dropped this borrower’s credit score by one hundred (100) points. The mortgage also showed as “Paid in full but settled for less than was owed.”…. Okay, this was kind of what we would have anticipated and is certainly consistent with the information we have received from the lending institutions over the last year. Then we see the real show stopper. The Loan Officer hands out the new Fannie Mae underwriting guidelines that go into effect May 31, 2008. Guess what? The rules have changed.
REALITY BITES
The reality for my client on the phone becomes painfully clear. My advice: You better find a good agent who is competent and experienced in handling a Short Sale transaction. Under the new Fannie Mae guidelines the effect of a Foreclosure on a borrowers’ credit worthiness is substantial, devastating and decisive. A Short Sale may reduce your clients’ credit score and will stay with them for about a one year or twelve month period of time. For all our clients who have “let it go to foreclosure”, I have some very, very bad news. Effective May 31, 2008, according to the Fannie Mae guidelines, a client who has filed a foreclosure will be “ineligible” for a period of five years. That is FIVE YEARS (5 years) for a foreclosure compared with a one year “ineligible” for a Short Sale. That difference is significant and will have an immediate effect on our business.
Don’t be Surprised
It should be no surprise to us that the lending guidelines would adjust. We should have all seen this coming, right? Certainly the prior estimates of a 2 year credit hit for a Short Sale as compared to a 3 year hit for a Foreclosure were astonishing and somewhat unbelievable, leaving many of us to wonder if the effect of either outcome made no significant difference to our Seller, then why did it matter which outcome they pursued? The implementation of these new guidelines solidifies the rules and changes the desired outcome for many of our Sellers. As a result, I think we will all become experts on the Short Sale transaction.
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An excellent article. Succinct. Informative. A must read!
Thanks for the article, but I am still not completely convinced that I can be as excited about telling people if they go through with a short sale, their credit will be repairable so easily and so quickly, as you. Even though I would like to think that. How can anyone be so sure about what a short sale will do to someone’s credit in the future? Case in point…I was in the mortgage business from 1986 to 2003. During that time, I have had applicants fill out the standard Fannie Mae 1003 form (THE application), and one of the questions, point blank, was, “Have you ever had a foreclosure or given a deed in lieu of”? If the applicant marked, yes, it was impossible for them to get a “normal” mortgage. A bank or mortgage lender would not touch them at all, ever, as I was told back then. I had to go to my private investors to help them, with extremely high rates. Most people couldn’t afford the loans. In the last few years, and in my opinion, the reason for some of the mortgage troubles today, is that they loosened that requirement and gave loans to people who were in a sense, credit deadbeats. Once a foreclosure, always a foreclosure – it is easier to walk away a second time. Now with all this mess, do you really think banks and mortgage lenders will continue to give loans to people who go through foreclosure or even a short sale. In my opinion, a short sale is just another name for a foreclosure or deed in lieu of foreclosure. I would almost bet that we will see the words, “Have you ever had a foreclosure, given a deed in lieu of foreclosure or particpated in a short sale”, on a new version of the fannie mae application. And then watch what happens. I hope I am pleasantly surprised for the sake of my future business and for those who want to buy a home and who knows, maybe for me, if this crisis doesn’t come to an end soon. Can we get a true ruling from Fannie Mae, Freddie Mac or HUD? They provide the “golden rule” in lending…he who has the gold, rules!
Sandy those are all great points. I think that practitioners are stuck with giving the potential Seller the information currently available from Fannie Mae and let them decide. Since this stuff always changes and everyone is virtually lost (especially federal entities) there is no telling if this will change in six months of six years.
The question I have, that no one can seem to answer is this: If allowances are not made for Short Sale and Foreclosure folks, then what happens to the future mortgage industry? With a projection (and we’re almost here) that over 30% of the loans given in the past five years going into default, by the end of this year; what happens when only 2 out of three potential buyers want to buy a home in five years? Compound this issue with those who had foreclosures before this crisis and add additionally the potential for Fannie Mae to begin declining those who went through short sales, it would take the replacement of an entire generation before more than 50% of potential buyers could actually get loans.
It’s a mess and Fannie Mae and Mortgage companies not giving benevolence for the unrealistic real estate market in the future would do no more than harm themselves.
Matthew, what has happened to personal responsiblity? Oh wait, when greed and fear take precedence, personal responsibility goes out the window. One of the reasons we have federal mortgage lending guidelines, is so big brother can protect me from myself and maybe more importantly protect the rest of you who are personally responsible for your actions AND take that responsibility seriously. I am responsible for my actions, whether it was intentional or accidental and will try to do the next right thing to correct the mistakes I have made. I have had to do A LOT of corrections in the past year, to get my “house” in order, and it still may not be enough. But, I have to do everything I can possible to meet my obligations. It is sometimes very painful for me to do the next right thing. I don’t want to go through the pain. I want to take the easy way out – give up and blame others or make others “pay”. I constantly hear, “It’s the mortgage companies’ fault for giving me a bad loan”. “I was told I could refinance”, blah blah blah. Why should they give benevolence…they didn’t force me to sign the papers. I have to get over it, grow up and find a way. I have come to learn that the pain I will feel to do the next right thing is short lived. I walk through the pain and when I do, I am constantly amazed as to what is waiting for me on the other side. And to answer your mind boggling question that no one can seem to answer, my friend…the answer is….you will know, when it happens.
Sandy. But what about the homeowner who has to sell their home with a short sale due to loss of income due to an unforeseen permanent disability. There are no guidelines for disability and how it can affect your credit score if you were not born with the disability. Many times a person gets social security disability after several months or years of waiting for an approval. It is just another variable to think about as when the ssdi is approved then the income is back on track but often times payments have fallen behind for no reason of their own and the credit scores go down…until the gov’t or social security can get all their paperwork approved. How would this affect a person’s ability to get a new loan if the short sale was truly no fault of their own due to disability?
Yes Garrin, there are the few cases of people who are really in a financial crisis, and some even with “unforseen permanent disabilities” but I predict that the MAJORITY of people in these short sales are those of which Sandra is refering to, the people who wanted the “American Dream” of owning a house, the only problem is they could’nt afford the house and chose to buy it anyways. I also know of cases where the individual turns around and somehow buys another house, perhaps in the same neighborhood as the house they are short saling, and buys it for 50% the price they bought thier first house for!!! I could have easily went out in that crazy market and said “let me buy a house I CANNOT, or will not ever be able to afford” but I thought these interest only (ARM) loans were nuts!!! Now the market is finally trying to correct for all these people who were not thinking about long term here…and now we have a huge mess on our hands :S
Almost all the short sales I have negotiated have been in the newer volume builder/developer neighborhoods. NOT ANY of the buyers were represented by a Realtor when they purchased the home they are losing to a short sale or foreclosure. When the developer/builder in these subdivisions have their own lender, sales person, title company, and appraiser, they can and did qualify any one that was breathing! We live in an instant gratification society unfortunately. High pressure sales tactics, significantly over priced new construction, mixed with first time homebuyers not understanding the consequences of their borrowing decisions has led to most of the short sales I have worked in the last 2 1/2 years. All it takes is the rate to adjust, property taxes to rise to the actual improved value (most were figured on ag exempt/unimproved land) and a hiccup in income and these homeowners are upside down and losing their home.
As to the “hit” to the credit score – a foreclosure is usually considerably more expensive to the lender than a short sale. Most of the short sales in our area (Texas) are not selling for huge discounts under market value or the principal amount still owed on the property. They are not good “flip” properties, but are good for owner occupied homes. Even buyers that are looking for rental properties are not buying these homes – the cash flow numbers don’t usually work for them. I’m sure in other parts of the country the lenders are losing more because of the drop in property values. We are very lucky here that our market has not appreciated, and then depreciated as much as in other states.
The only thing I have ever seen in writing about the impact on a credit score was in a lender approval letter for a short sale. I don’t have the document in front of me, but it did say the short sale “would not have any further negative impact on the credit ?????”. I will try to find the document if anyone is interested. Of course, there is no guarantee about what will or will not impact credit ratings in the future. All we can do is communicate what the rules are right now. Pam
Sandra, I would like you to know that not everyone faced with this decision of short sale/bankruptcy blame the mortgage companies. In fact I feel bad for the companies that are going belly up or that are in dire straits for the situation caused. I have a great loan and had no problem paying it. Yet the influx of the investor buyers that flooded and escalated the market price has put a damper on all that try making an honest living. Being a hard working construction worker, I have raised and supported my family for the past 10 years. Now that all the investment potential is gone in my area, so are over 75% of the deceptive buyers trying to make a fast easy buck. Meanwhile the job market has been left at a standstill and if companies are hiring you would be lucky to get on at 60% of what your worth. I see companies shut down all the time. And now we are faced with a decision that takes us away from the home we have created for us and our kids. FYI, this decision is NOT the “easy way out” as you described. I have plenty of personal responsibility, and it makes no difference if you cannot get a job in your qualified line of work. I hope you read this Tuffy.
A very good article. It’s nice to know the real credit damage to short sales vs foreclosures.
What about short sale because of job loss. My husband lost his job and has been looking for four months. Still no job. We are being put into a short sale situation because we cannot pay out mortgage on umemployment. Are there degress of short sale depending on the circumstances?
Tammy,
I’m sorry for your hardship. The best options are for you to start with http://www.995Hope.org which is a site established by the government to help people in your situation. There is a lot of help there and it’s an easy site to use. The next step is to find a Realtor with experience in short sales to help you navigate the process.
Typically there aren’t levels of shortsales. Generally speaking, a shortsale is simply when the selling price isnt’ sufficient to cover the debt leveraged against the house. It’s not necessarily the level of hardship that determines if the shortsale is going to be accepted by the lender. In most cases, it depends on if the numbers will work for the lender.
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Thank you for your post explaining he difference to the credit reports with the changes effected in May 2008.
In Arizona our market “peaked” in 2005 and has had an incredible decline since. In the large developments (like Pam was mentioning earlier) that are in outlying areas of the Valley are where the poperty values have dropped by as much as half. What we hve started to see is people who purchased their homes in 2005 for say $400,000 are then turning around and buying a second home, often in the same neighborhood, at the now reduced price of say $250,000, while the first mortgage is still in good standing. They say they have a renter lined up all ready to move in. Then they walk away from the first home and live in the new home, at a drastically reduced mortgage. Same lifestyle, less money.
Not all of these foreclosures are going to be loans made to people who couldn’t afford the mortgage or are in a desperate situation. Some of this mess is going to be people who simply decided to take the hit to their credit in order to not be upsidedown in their loan. I think that will add a whole new dimention to the market problems.
I believe it was a good number of circumstances happening at the same time that caused a good deal of this Short Sale and Foreclosure market.
As Pam Jernigan mentioned about builders, if you look in our own MRIS MLS, there are certain “new” neighborhoods that had or have a substantial number of short sales or foreclosures. I believe there was a point where 11 homes were for sale and 9 of them were Short Sale or Foreclosure. How can that be except the builder affiliations were doing everything in their power and beyond to make the deals happen so EVERYONE could make money. And again, I agree with Pam that the buyers undoubtedly thought they were being smart buying from a builder, using the builder’s affiliations for mortgage, etc., and that they would get a “good deal” because the builder wasn’t going to have to pay for the buyer’s agent because they weren’t represented by one. Affiliations should be outlawed! And, I don’t doubt a lot of buyers even today think the builder’s rep is looking out for them – even if they signed a brokerage disclosure – a lot of buyers just do not understand everything about the real estate transaction. You can shout it from the highest mountain forever and it will still be the same. For the “more informed” generation that’s in our wake – I don’t see much in the way of “informed”. It comes down the buyers saying “just get me the house, just get me the house.” Consequences of not getting themselves informed – oh, they’ll wait until later to learn more about what they’ve just put theirselves into.
Mortgages were definitely given to anyone who could breath. There are a number of lenders out there who are reputable, conscientious, and ethical. They’ll tell a buyer they are not qualified and won’t give them a mortgage. On the opposite end are a good number of lenders who were and still are giving anyone a mortgage just to make a buck. The higher ups want deals or their butts out the door. It wouldn’t bother me if the buyers were actually qualified, particularly in an ARM situation where they had to STILL be qualified at the 3rd ARM increase but I don’t think that happened. I’ve heard of 6 month increases and the joke is they were only qualified for 15 minutes! At least that beats just breathing.
Appraisers contributed to some of the extremely rapid increase. I just don’t understand HOW one home across the street sells for X number of dollars and two weeks later an identical home sells for $30,000 more! I read a lot of the appraisal websites and appraisers problems with ARCs (I think those were the initials) and if you don’t play their game, accept their lower fee (although they seem to charge the buyer client more than the appraiser charges) or you don’t play by the lender’s rules to make the deal happen the way they want that they won’t send business your way. Appraisers should be totally independent of any coercion or affiliations in order to obtain true market value. Sellers have their “motives” for selling their home and if the appraisal just ain’t high enough then don’t sell until the market says it is OR they can change their priorities of living “beyond” their needs and accepting what they will “get”.
And yes, there is personal responsibility as Sandra has said – there are still many of us left who believe in personal responsibility. I’m a broker and I don’t have a flashy new vehicle. I don’t have new furniture. I don’t have the latest fashions. I live in a mid-sized 14-year-old home with NO second mortgage, and I don’t have a plasma TV. I don’t have an in-ground swimming pool. My credit cards are paid in full every month. I don’t live to impress the Joneses and that’s a major problem in America – the Joneses. Have you ever walked into some of these Short Sale homes and seen that their “stuff” is newer than yours? Although there are some who were innocently caught up in the Short Sale and Foreclosure dilemma, there are many who should have NEVER had a mortgage. There are many who will always feel NO responsibility towards their debts. Past history usually dictates future history and that includes credit history.
In a Letter to the Editor of The Free Lance-Star recently, a man wrote that he and his significant other had purchased a home 10 years ago and now, after all these years, they are finally going to have the baby they’ve been trying to have but what happened to the American Dream? His home is going to go into foreclosure. He wants to know when prices are going to come down to where people can purchase a home. [Perhaps he’s like the person Kerry mentioned and is trying to purchase another home before the foreclosure hits.] Now, come on, all of us in real estate have a pretty good idea that 10 years ago homes were selling for a lot less than they were in the years 2002-2007. Considering one has to pay rent if one doesn’t pay a mortgage, I wouldn’t doubt for a second that this person probably refinanced and cashed-out some dollars when the going was good.
A good lender will require several months’ worth of income to be in the bank for a cushion. If ANYONE watches Suze Orman or has been reading ANY financial help throughout the years – you need 6-8 months worth of income in a savings account MINIMUM. I wouldn’t doubt many of these buyers have only ever had 1 paycheck in the bank. And, there’s always that thing called “living BELOW your means”. Just because the Joneses have it all doesn’t mean it’s paid for!
Ever read The Ant and The Grasshopper fable? I’m the Ant – a lot of these other people are Grasshoppers and lenders shouldn’t be lending to Grasshoppers.
For Michelle’s comment about how there’s basically not going to be much of buyers around for a good number of years – there will be Ant buyers around, just not Grasshopper buyers and that’s fine with me and probably the rest of “responsible” America.
I am so frustrated. We are trying to do a cash out refinance on our current home. We have over 200K in equity and want to take out about 40K on our mortgage loan. We have good credit but the problem is we have a short sale on our credit report now. 2 years ago we started an investment home. It sat on the market for 2 yrs from time of completion to sold. We paid every interest payment on time, exceeding 80k. Now the underwriters say they will not do a cash out refi and this will be on record for two years. Is there any lender that will give us a cash out refi considering we have good credit, no late payments, never missed a mortgage payment in the 20 yrs we have owned a home. Very frusting!!
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Betty,
I’ve actually heard this situation delivered to some representatives from the major lenders. The lenders hold that the deficiency judgment is a stronger indication of propensity to repay than the credit score.
Unfortunately, I think it’ll be some significant time before lenders are benevolent. It sounds like you’re the unfortunate victim of a financial industry becoming extremely restrictive.
Matthew Rathbun’s last blog post..I couldn’t have “said” it better myself…
Back to Short Sale vs Foreclosure. I’m a real estate agent and just want to do what is best for my client and their credit situation. It sounds like short is the way to go albeit pro and cons for both. Which will keep them is their home the longest?
I was just turned down for a mortgage. I had a short sale 15 months ago. I was told that the underwriter looks at a short sale as being the same as a foreclosure. Is this true?
Cheryl,
Your question about doing the best for your client is complicated. Your client really needs to decide what’s best. Staying in the home the longest; is usually done by the foreclosure. Most borrowers can stay in the house until after foreclosure and then have to be evicted by court order. So typically they can stay in the home for maybe up to 30 days after the new buyer has taking possession.
Staying in the home the longest maybe the short sited best interest. Each month they stay in the home will cause more and more damage to their credit. Short sale isn’t much better on their credit, but it is still a bit better and much easier to explain than a foreclosure; should they pursue a conventional loan in five years.
Joe,
Each lender may have different criteria. The underwriters guidelines are different for each loan. Having said that we’ve heard that for most federally backed mortgages the are looking for a five year waiting period, post short-sale, to issue a loan.
A deficiency judgment can be considered by lenders, the same as a foreclosure.
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My husband and I are facing the decision of foreclosure vs. short sale. We bought a home we could afford for 30k under appraisal value. I was laid off from my county job due to funding cuts and have been unable to find a job since, we can no longer afford the payments and were turned down for modification due to the fact they don’t count unemployment as income, we have a FHA-HUD loan and according to my lender, those are not covered under the Obama modification plan. Our home currently is worth about 45-50k less than we owe, with three homes already for sale on our block at under market value in the same situation. We would like to own a home again one day when I find another job after we save back up what we’ve lost, but are not sure whether we should go through the work of short sale or let it go to foreclosure since we don’t plan to try to buy another home for about 5 years anyway. . . what do you think we should do???? We have three small children and never foresaw this outcome in our future.
Amber,
Unfortunately, we can’t really give you detailed advice on this forum. Very few are ever encouraged to simply go to foreclosure with out at least attempting a short sale.
You situation is not uncommon. We’re seeing short sales approved for far more of a deficiency than what you’ve laid out here. Each Lender is different, of course. Perhaps calling your lender for guidance and or calling 1-888-995-Hope (or visiting http://www.995Hope.org will be other good places to start.
Just because the guidelines currently have a waiting period; or credit scores are damaged now, doesn’t mean that those guidelines will not change in the future. There are a number of “insiders” who feel that in the future short sales will be given more benevolence than foreclosures.
There are still conventional loans that see foreclosure as worse than shortsales.
You really don’t have much to lose by attempting a short sale, generally speaking.
You should really consult an experienced agent, with knowledge of the short sale process or an attorney to help you make this difficult decision.
The inequity of granting someone who is lucky enough to get a short sale a better shot at improving their credit or getting a government loan than someone who is foreclosed upon should foster outrage against the agency.
We know lenders approve very few short sales. In our market 10,000 active short sale listings yield 50 inventory removals a week – (gee in two hundred weeks they could all be gone) . Certain servicers I’m sure accept no short sales. These servicers represent many of the worst and most exploitive lenders who created garbage loans that were sent to be sliced and diced on Wall Street, and like humpty dumpty they can’t be put back together- they are the toxic assets and literally no one is empowered to approve a short sale so the loan must go to foreclosure. So someone who has the misfortune to be handled by one of these lenders may have zero chance of getting a short sale but his neighbor in otherwise identical circumstances can. I see no fairness in this.
The whole reason for these rules is to discourage voluntary foreclosures by underwater borrowers. It may even just delay them so the financial system looks more robust. The whole sucker play is to induce the poor saps who are underwater to keep paying ’til they can pay no more. Those with an ounce of sense, or the misfortunate to have actually lost a job, [or should we say those who lose jobs are morally inferior and should suffer] go the foreclosure route intentionally or without option. Note that both Country Wide and Merrill Lynch were heavily involved in various parts of this business and they are now owned by Bank of America which is the prinicipal beneficiary of tax payer largess thru TARP. BofA is both too big to fail and is totally wired in so what’s good for BofA (this stupid rule change) is good for America , even though a lot of Americans are being unjustly hurt.
I bought my first hom in 2005, when the prices of the homes were very high in Arizona. I was given an interest only loan (I ended up putting some money towards the principle though) and a 7 year ARM. The theory then, was that the values of homes in my area would keep climbing up and I would end up making money off my home, even with my interest only loans.
I am able to make my montly mortgage (its tight, but I can do it) but life circumstance has lead me to need to move to California. The real estate agent told me I was about $30,000 “underwater” and that I would have to consider a short sale or foreclose. I need to move to California ASAP, so I cant wait years for my house to sell if I do chose to do the short sale. It just seems like houses around here are not selling.
I need some help figuring out the best option for myself. I have heard conflicting opinions about which is the better choice between a short sale and foreclosure.
Please help! Im a single, working Registered Nurse who has done a good job in my finances so far but i am now facing a difficut decision!!!
I am going through a divorce, and we need to sell our home. Neither of us can make the payments alone. We have our house on the market, and our agent knows that it will be a short sale. They have a woman on staff who specializes in working with lenders on short sales.
I was talking with someone last night, and he was saying that foreclosure was the best way to go now. He was very adamant about this. However, looking at the postings, short saling our house would be better in terms of our credit. I don’t know the goals of my soon to be ex husband, but I would like to be in a house in the next 5 years.
Any thoughts to this????
Now, I don’t think I am a free-loader or one who is trying to get more than I deserve. As a married couple living in a house, we could afford it and would have kept affording it if the marriage would have worked out. So there are many circumstances that go into a foreclosure/short sale, not just those living the good life and realize they are living to freely!
Thanks for any input!!!! Brandy
Richard of June 14th, this is Connie of March 3rd
AND TO ALL REAL ESTATE AGENTS OUT THERE
This is in response to Richard’s mention of BIG banks and their powers. I’ve posed a question to the Virginia Bar Association regarding REO properties where the bank is REQUIRING buyers in Virginia to use their closing agent/settlement company or their contract offer will not be considered or accepted. Now, we all know VA Code forbades this – correct? ["§ 6.1-2.21:1. Choice of settlement agent. A purchaser or borrower in a transaction related to real estate in the Commonwealth shall have the right to select the settlement agent to provide escrow, closing, or settlement services in connection with the transaction. The seller in such a transaction may not require the use of a particular settlement agent as a condition of the sale of the property. (2009, c. 140.) "]
Have any agents out there had clients who were, in my opinion, “coerced” by the selling bank or the listing agent to use that bank’s closing agent/settlement company or their ratified contract would be rejected? We all know purchasing a home is an emotional thing and this just pushes it over the cliff. If anyone has – I would certainly like them to contact me regarding this.
Connie,
Just a reminder that this is a Federal mandate regarding the choice of settlement preference for title services/insurance in RESPA guidelines.
Commonly the REO lender, when challenged about the buyer’s choice, will say “Oh, those are forms we use in every state and didn’t know Virginia’s law”. I don’t know why they try this, with a federal law in place.
Regardless, it’s a common “demand” from Lenders, but usually when the listing agent won’t stand up to the lender and decline to add that requirement.
Many listers will place the “demand” in the MLS and claim caveat emptor. I call it predatory – in that they are hoping the buyer will not know their rights or will feel the need to waive their rights in order to get the home of choice. This is a ubiquitous practice…
I hope that the RESPA re-write will prohibit even being able to market or advertise a Seller’s preference. I understand that the current task force is looking to (maybe have) make it unlawful to offer incentives for using the Seller’s settlement company of choice.
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Brandy,
It’s hard for any agents to give you advice, since your working with a Realtor®. There are prohibitions in interfering with an agency relationship, so you will need to have this conversation with your agent, when seeking advice.
What we can respond to in general, is that most of the time Short Sale maybe a better of the two options. However, a CPA and/or attorney is who you actually need to direct your questions to.
Matthew Rathbun´s last blog ..My Stay at the Hyatt Place in Chesapeake Virginia
Brandy,
Last year in August I sold my home as a short sale due to the same reasoning you have. My realtor recommended a short sale right from the get go. The process was somewhat of a hassle especially since I had two mortgage companies do deal with. Long story short…I would recommend a short sale over a foreclosue any day.
Hang in there!
Hi
My question is the morgage is in my husbands name only , but the title is in both our names. Does this effect both our credit scores or just his? If we short sale
Many thanks in anticipation of the answer
Tracey
I bought my home before I met my husband. We’ve been married for nearly 3 years now, and though the agreement was that we’d sell my home and buy another home together, we’ve been unable to do so. My husband makes the best of it, but is frustrated living in “my” house. Our dream of moving to another town we both love is also on hold as long as we’re stuck with my house.
We can afford this home, but consider walking away just to be able to realize our goal of moving away from our current town. It could be years before I’m able to sell my home for what I owe. It would rent for only about 65% of the mortgage payment.
Five months ago the house appraised for $285k, but the comps are going for much much less. I believe, based on the comps, and the fact that no one is even looking at our home, that it would sell for around $240k. I owe $268k. I’ve always been a person of integrity. My credit score is excellent. I’m beginning, however, to feel like I’m paying, unfairly, for a situation that I personally did not create. How long is one expected to remain in a situation they’re not happy in? I’m beginning to see this as a business decision and not so much a moral one. It’s interesting to me that in cases other than real estate, cutting one’s losses of a bad investment is considered prudent. If I thought the bank would work with me on a short sale, I’d gladly go that route, but because I don’t have a qualifying hard ship, I don’t think it would be an option. I’m beginning to consider a strategic default. Any thoughts on this? Am I missing something? I’d love input.