The number one reason a distressed homeowner should proceed with a short sale is to protect their ability to obtain financing in the future. Most short sales result in a “settlement” status on their credit report as opposed to “foreclosure”. Fannie Mae and Freddie Mac guidelines are much more favorable to borrowers with short sale on their credit report, typically allowing a borrower to obtain financing for a new home within a couple of years. In sharp contrast, a foreclosure remains on a credit report for seven years, making it very difficult to finance another house, a car, open a new business, or even qualify for credit cards. Any loans received will most likely bear very high interest rates. Bottom line: the end result of a short sale is minor when compared to the consequences of a foreclosure. Foreclosures have a devastating effect on credit history, job security, employment opportunities, security clearances, military and law enforcement careers, and the most serious of all – the ability to purchase a home in the future. Also, a foreclosure becomes public record, which is searchable by anyone, and can never be removed.
A Short Sale offers a fresh start, eliminating debt, while minimizing damage to credit and avoiding eviction proceedings.
Government programs (HAFA, HUD PES, lender initiated short sale programs)
We are very familiar with government short sale programs and get as many of our short sale files into these programs as often and quickly as possible. There are many reasons to do this. Firstly, these programs assist us in putting a stop to foreclosure proceedings, thus buying us more time to get an offer and eventual short sale approval. Secondly, many of these programs mandate lenders to waive deficiencies – good news to the seller/borrower. Thirdly, these programs provide thousands of dollars from the Treasury to assist the lenders in approving the short sale by providing contributions to 2ndlienholders to satisfy their debt, and by providing monetary incentives to the seller for relocation expenses. Additionally, these programs can look in a 6% commission to the agents, plus accelerate deadlines to receive approvals from the lenders.