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Ginny Vickers REALTOR Licensed in the Commonwealth of VA
540-842-9819
gvickers5@msn.com
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Ginny Vickers REALTOR Licensed in the Commonwealth of VA
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540-842-9819
gvickers5@msn.com
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SHORT  SALE VS. FORECLOSURE CHART  (Short Sale Questions- see below)

  FORECLOSURE
SHORT SALE
FUTURE ABILITY TO PURCHASE     May impact for 7 years                          May be eligible in 2-3 years
IMPACT ON CREDIT                         Scores may drop 250-300 pts,             
Can Affect Credit for 7 years                 
“Foreclosure” on Credit report           

May only affect credit 12-18 mos

Closed SS are reported to Credit
Bureau as “paid as settled”, “paid  
As agreed”, etc., Scores may drop 50-
100 pts.
        

 

SECURITY CLEARANCE                    Serious impact on Clearance,               
Possible revocation

May or may not affect Clearance

DEFICIENCY JUDGMENT               In Virginia, the bank CAN pursue            
A deficiency judgment on all                    
Foreclosure costs and difference              

Between sales/ mortgage balance

Bank may or may not waive
a deficiency

EMPLOYMENT                              Can impact employment and                    
Future job search
Employment not usually affected
 What is a Short Sale? A Short Sale is a negotiated settlement (form of debt settlement) between the homeowner and a purchaser that your lender must give final approval to. The homeowner owes more on their mortgage than the home is worth. The equity in the house is not enough to cover the mortgage that is due.

What are the benfits of a Short Sale? The Homeowner is usually able to stay in the home until it is sold. Banks do not like the home vacant due to security reasons. There is less ofo an impact on their credit score with a short sale. A foreclosure can casue as much as a 250-300 point deduction; whereas a short sale may only result in a 50-100 point deduction. Late payments affect credit more than the acutal short sale itself. Credit recovery is also quicker with a short sale. Lower credit scores can affect your ability to obtain additional credit. (credit cards, cars, or rental housing). Auto insurance premium can also increase. Banks prefer short sales. It costs an average of $60K for a bank to foreclose. With a short sale, the homeowner is usually able to purchase another home within a shorter timeframe...2-3 yrs. Foreclosure 3-7 yrs. Employer's eyeing employees' credit profiles continue to grow. In Virginia, banks can seek deficiency judgments in a foreclosure. With a short sale, I negotiate to get this amount lowered and many times forgiven or full lien release. Your lender typically pays the real estate commission and closing costs.

How long will the short sale take?  The process can take months depending on the bank and the number of loans on the property. Average is 3- 6 months. That is why it is important to work with a Realtor who is certified in Short sales and has experience in the process. I handle the negotiations and details with your bank as well as all listing and sales aspects of your home. I negotiate a lower payoff amount and aggressively market your home. I oversee the entire sales process of your home. These services are at no cost to the homeowner.

What information will I need to get ready to send to the bank?  You can start gathering loan numbers, mortgage statements, last 2 years W-2s, last 2 month's bank statements, hardship letter (loss of income, job loss, divorce, job transfer, medical expenses, increased bills,  financial statements, etc. Contact your bank to see if you can qualify fo a loan modification or refinance. Check www.995HOPE.org or www.hopenow.com. You can also call your lender and ask that their short sale packet be sent to you. You cannot do a loan modification and a short sale at the same time.

Why do short sales fail?  There are a number of reasons. The bank wants a price close to the BPO (Broker Price Opinion) or Appraisal. The bank may not approve the sales's price and buyer may be a their limit. Many buyers are not able to increase their offer. The bank may not agree to other terms in the contract. The bank may ask the seller for a contribution. Sellers may not agree to the bank's terms such as a promissory note or cash at settlement. Many buyers get impatient and lost interest in the house because of the length of time it take to hear from the bank. Some sellers do not provide the bank's information in a timely manner or it is incomplete. Sometimes there is not enough time to get the short sale done before the foreclosure date. Sometimes there is more than 1 loan on the property and may be more difficult (not impossible) to get approval. Many assigned bank processors have hundreds of short sale files they are working on at any given time. Sometimes the homeowner cannot prove a hardship. A short sale will nto be approved just based on the fact the market is worse and the homeowner doesn't want to pay on a property that isn't worth what he paid for it. The seller must have a hardship.

Are there Tax Issues with a short sale or foreclosure?  When a bank writes off a debt (lender reports loss to IRS), it has to be shown as income for someone else. Banks send you a 1099 for the amount forgiven. In many circumstances the Mortgage Debt Relief Act of 2008 no longer requires taxpayers to pay federal income tax on the forgiven debt, provided the property is their principle residence only. The Act expires the end of 2012 unless extended by Congress. You would need to discuss this with your tax advisor.

What is a Judgment Lien State? Virginia is a judgment lien State which means your Lender may pursue monies owed with a short sale or foreclosure. Most homeowners qualify for the Mortgage Debt Relief Act and it has major tax advantages. If you choose not to do a short sale, the bank will NOT forgive you for the debt and may continue to pursue you for the outstanding loan balance. You would need a real estate attorney to advise you on this matter.

What is SFR?  This means a Realtor is certified in Short sales. He or she has completed the short sale course, exam, and required CEUs. He or she is a resource for you during the short sale process.
*Disclaimer--I am not a tax advisor or attorney. Anyone facing foreclosure/ short sales should contact an attorney for legal/ accountying matters/ questions-
Ginny Vickers REALTOR  SFR