Strategic Default/Foreclosure VS. Short Sale

Strategic Default/Foreclosure VS. Short Sale

What are the Homeowner Consequences in each?

Most persons losing their homes to foreclosures
do not realize there are better options available to them today.

Do you know anyone that could benefit from this information?
Please have them call me or visit my
Short Sale and Foreclosure Avoidance Web Site at

http://hafashortsaleconsultant.com/
for more information & free reports.
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Future Fannie Mae or Freddie Mac Loan - Primary Residence

Foreclosure
A homeowner who loses a home to Foreclosure will not be eligible for a Fannie Mae, Freddie Mac, VA or Conventional Mortgage for a period of 5 years.

Successful Short Sale
A homeowner who successfully negotiates and then closes a short sale WITHOUT BEING LATE on any obligation may be eligible for a Fannie Mae backed mortgage after only 2 years and a conventional or FHA loan immediatly. Several conditions apply.

VA loans whether late or not, and FHA loans with late payments are a 3 year wait.

Conventional loans are a 2 year wait if there are late payments.
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Future Fannie Mae Loan – Non-Primary Residence/Investor

Foreclosure
An Investor who allows a property to go to Foreclosure will not be eligible for a Fannie Mae backed investment mortgage for a period of 7 years.

Successful Short Sale
An investor who successful negotiates and closes a short sale may be eligible for a Fannie Mae backed investment mortgage after only 2 years.

Conventional investor loans will take 5 to 7 years depending on late payments.

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Future loan with any Mortgage Company

Foreclosure
On any future 1003 application, a prospective borrower will always have to answer YES to question C in Section VIII of the standard 1003 that asks "Have you had property foreclosed upon or given title deed in lieu thereof in the last 7 years?" this will affect your future interest rates.

Successful Short Sale
Does not apply on a short sale.

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Credit Score - FICO Score

Foreclosure
May be lowered anywhere from 250 to 300 points or more.
Typically this will affect the credit score for over 3 years.

Successful Short Sale

Only the late payments on loan will show and after the sale. The loan will be reported as paid as agreed or negotiated or settled. This will lower the credit score as little as 50 points provided all other payments are being made on time. A short sale's affect on credit can be as brief as 12 to 18 months.

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Credit History

Foreclosure
Foreclosure will remain as a public record on a person's credit history for at least 10 years.

Successful Short Sale
Short sale is not reported on your credit history. There is no specific reporting item for 'short sale'. The loan is typically reported “paid in full, settled” or as “paid as negotiated”.

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Security Clearances

Foreclosure
Foreclosure is the most challenging issue against your security clearance outside of a conviction of a serious misdemeanor or felony. If a person has a foreclosure and is a police officer, in the military, in the CIA, Security, or any other job that requires a security clearance,  the clearance will be revoked and position will be terminated, in almost all cases

Successful Short Sale
A Short Sale by itself, does not challenge most security clearances.

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Current Employment

Foreclosure
Employers have the right to, and are actively checking, the credit regularly of all employees who are in sensitive positions. A foreclosure in many cases can be grounds for termination or immediate reassignment.

Successful Short Sale
A short sale is not reported on the credit report and therefore is not a challenge to employment.

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Future Employment

Foreclosure
Many employers are requiring credit checks on job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will be a challenge to employment.

Successful Short Sale
A short sale is not reported on a credit report and is therefore is not a challenge to employment.

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Deficiency Judgment

Foreclosure
In California, there is no deficiency judgment for purchase money loans for 1-4 units.

For non-purchase money loans,  the lender has the right to pursuit a deficiency judgment against the homeowner in some cases.
Successful Short Sale
In some successful short sales, it is possible to convince the lender to give up the right to pursuit a deficiency judgment against the homeowner. If you are approved under HAFA, there can be no deficiency judgment.
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Strategic Default/Foreclosure or Short Sale. 
Which one is better for you?

See my Short Sale and Foreclosure Avoidance Web Site at
http://HAFAShortSaleConsultant.com/
for more information and free reports.

This article was revised 5/3/2010, after the new HAFA guidelines came out.

As always, this article is for informational purposes only and is not legal or tax advise.  You should contact the appropriate professional to see how a Strategic Default/Foreclosure or a Short Sale will affect you.





Dennis Smith, ABR, SRES, e-PRO, CDPE, Realtor® DRE# 00476662
Certified Distressed Property Expert

Donna "Sunshine" Smith, SFR, Realtor® DRE# 01249837
Short Sale, Foreclosure Resource Certified

RE/MAX By-the-Sea
Formerly with Taylor Place Real Estate
Buy or Sell a Home with Me, Use my Moving Truck - F R E E for life.
dennis@SanDiegoHomes4u.com
760-436-0087, or cell at 760-212-8225
http://www.sandiegohomes4u.com/home.htm

My Market Trends Report with graphs and charts for North Coastal San Diego will give you the Sales Statistics for the month and compare it with last year, by city!
http://www.sandiegohomes4u.com/RealEstateTrends.htm
 
You can view all available San Diego area homes for sale at
http://www.sandiegohomes4u.com/MLS_Search.htm
You can search by address, by MLS number or by general criteria.

Providing quality Real Estate services in the North Coastal San Diego area including Del Mar, Solana Beach, Rancho Santa Fe, Cardiff by the Sea, Encinitas, Leucadia, Olivenhain, Carlsbad, La Costa, Aviara, Oceanside, Vista, San Marcos, San Elijo Hills, Escondido & San Diego Count

Are you REALLY ready to buy a home?

Are you REALLY ready to buy a home?

Scenario...
We are out looking at homes and we see a for sale sign being installed. We call and the agent says it will be in the MLS tomorrow. The agent states that you MUST Pre-qualify with THEIR preferred lender. We have the chance to beat everybody to the property.

Are you ready to supply the following information to their preferred lender?

Is it all packaged in one place where it can be sent within the next 5 minutes?

1 - Last 2 to 3 years of Tax Returns
2 - Recent pay stubs proving year to date earnings
3 - A photocopy of the driver's license
4 - Copy of all recent bank statements
5 - Copy of all investment accounts
6 - Front page of your Credit Report with FICO score (may require their own)
7 - Copy of a completed loan application (may require their own but now easy to complete)
This is the basic for most lenders but they may have other requirements.
These will be needed for each person on the loan.

If you are not ready to provide this info ASAP, you may end up in the middle of a competitive bidding situation instead of the first offer.

Which is your choice? Are you REALLY ready to buy a home?
PS, bring your checkbook for a good faith deposit.

Of course, all this assumes that I have already received your Pre-Approval from a Direct Lender. If not, that is your first step. I can provide you with a referral to a top lender here or almost anywhere in the US or Canada.

If you are buying with ALL cash, you will need:
Recent copies of bank statements (dated within 30 days, including your name, institution & the account numbers with enough money for the purchase & closing costs. Some banks will not allow stock accounts.)


Dennis Smith, ABR, SRES, e-PRO, CDPE, Realtor® DRE# 00476662
Certified Distressed Property Agent

RE/MAX By-the-Sea
Formerly with Taylor Place Real Estate
Buy or Sell a Home with Me, Use my Moving Truck - F R E E for life.
dennis@SanDiegoHomes4u.com
760-436-0087, or cell at 760-212-8225
http://www.sandiegohomes4u.com/home.htm 

My Market Trends Report with graphs and charts for North Coastal San Diego will give you the Sales Statistics for the month and compare it with last year, by city!
http://www.sandiegohomes4u.com/RealEstateTrends.htm 

You can view all available San Diego area homes for sale at
http://www.sandiegohomes4u.com/MLS_Search.htm
You can search by address, by MLS number or by general criteria.

Providing quality Real Estate services in the North Coastal San Diego area including Del Mar, Solana Beach, Rancho Santa Fe, Cardiff by the Sea, Encinitas, Leucadia, Olivenhain, Carlsbad, La Costa, Aviara, Oceanside, Vista, San Marcos, San Elijo Hills, Escondido & San Diego County.

San Diego Area Home Buyers Alert

San Diego Area Home Buyers Alert

The first quarter of 2010 is going to be a challenging time but worth the effort for the greater San Diego area home buyers,
especially for the under $500,000 houses and condos.
(This is good news for sellers.  Call me for the sellers plan.)

The available total inventory is down from the peak 14,709 on 2/6/09
    to 11,317 on 1/4/2010.
Only 3726 homes under $500,000 are available which is a 50 day supply.
1407 of the homes under $500,000 are Short Sales.
The number of bank owned properties is 70% lower than it was a year ago. There is only a 3 week supply (734 on 1/4/2010).
Each quarter we hear that the banks will start dumping homes on the market but not yet and probably not ever…see my Blog article at http://sandiegohomes4ucom.blogspot.com/2009/10/where-are-all-foreclosures-san-diego.html

Short Sales are still taking 3 to 9 months to close, despite a push from Obama. They keep telling us they will get quicker but that is what we have heard all last year.

You must be in escrow by April 30, 2010 to get your Tax Rebate.
A big time pressure for buyers...but many will procrastinate...DON'T.
For best results, START LOOKING NOW! Plan to buy in Jan. or Feb.
There is some talk or extending it but, can you take that chance?
Many will wait till Mar or April and will loose out.

The Senate Finance Committee and Capitol Hill in general, are not inclined to extend this program again. The National Association of Realtors, the lobbyist for this program, were cautioned that any discussion regarding a further extension of the program was not likely, and would certainly be met with opposition..
Lenders have tightened up on the requirements again.
Interest rates will go up, possibly to 6% which is a 16% increase, over the current 5%.
See  the Washington Post article at http://tinyurl.com/ylpk9ag about how the Fed will not buy MBS - Mortgage Backed Securities after March 31st and how it will cause interest rates to rise.

What can the serious buyer do to get a home?
1 – Be totally ready with your financing. That means a fully documented loan package submitted to the lender before you start looking for a home. Banks & FHA continue to tighten up their requirements. They want to see higher credit scores (640+ FICO), at least 3 active credit lines (suggestion: pay your utilities on line or buy a tank of gas a few times a year so every card shows activity), no late payments or new collections in the last year. Keep all credit cards below 40% of your limit at all times.

2 – Be prepared to make several offers before you get one accepted. There is a lot of competition as many buyers are fighting for a limited pool of homes and they also need to buy before the Tax Rebate deadline of 4/30/2010. There is no perfect home so do not fall in love with the home until it closes. Remember what your goals are for this home. It probably will not be your last home so think 3-5 years or 5-7 years…whatever your time frame is.

3 – Be prepared to pre-qualify with several lenders along the way. You may still use any lender you chose. Each bank owned property wants you to qualify with them for 2 reasons…they want to find out if you are really qualified, and they want to have a chance of getting your loan. Strategy: keep a copy of your loan application from your first lender along with your credit report & FICO score, copies of pay stubs, bank statements, 2 years of tax returns and more.

4 – Make your first offer, your “Highest and Best” offer. Most of the time the banks will come back to some or all of the buyers in a multiple offer situation and give everybody a second chance. However, some banks will take the first good offer, or the best looking offer without a counter. Wouldn’t it be great if it were your offer that was accepted.

5 – Prices are going up (they have for 10 months in a row). So reasonably higher offers are OK. Todays appraisers often come in on the low side of the property value. If your offer is way too high, the bank will see through that ploy. However if you offer a reasonable amount over the comparable sales, the appraisal may help you bring the price down. Since prices are going up, even if you think your offer is high, you will look back and say “Remember when we bought this house for $X.XX and now it is worth much more than that…we could not afford to buy our own house today”. 

This first quarter will be a challenging time but worth the effort for the greater San Diego area home buyers.  I do not expect to see these prices again.

In the San Diego Union Tribune on 1/3/2010, the caption to the housing chart was "Median price 48.4% higher than January 2000".  Real Estate will always be a good long term investment and sometimes a good short term investment.  Now is the time to buy near the bottom and ride the prices up while you live in, and enjoy your home.

6 – Be on top of the listings and the market. Many of the San Diego area bank homes and regular homes are getting multiple offers and are going into escrow quickly, some in 1 or 2 days of being listed. If you know the market, you will see the value and be ready to make a decision right away without “sleeping on it”. A one day delay could be all it takes to loose the home.

7 - Keep looking, even after you have submitted an offer. If you do not get this one, you must be ready when the next one appears.

Buyers, we need to schedule an appointment to plot our strategy to get you into your San Diego area home. Call me to set an appointment to meet, review your needs and wants, then visit some homes. Call my cell at 760-212-8225 today!


Dennis Smith, ABR, SRES, e-PRO, CDPE, Realtor® DRE# 00476662
Certified Distressed Property Expert
Taylor Place Real Estate
Buy or Sell a Home with Me, Use my Moving Truck - F R E E for life.
dennis@SanDiegoHomes4u.com
760-436-0087, or cell at 760-212-8225
http://www.sandiegohomes4u.com/home.htm

My Market Trends Report with graphs and charts for North Coastal San Diego will give you the Sales Statistics for the month and compare it with last year, by city!
http://www.sandiegohomes4u.com/RealEstateTrends.htm

You can view all available San Diego area homes for sale at http://www.sandiegohomes4u.com/MLS_Search.htm
You can search by address, by MLS number or by general criteria.

Providing quality Real Estate services in the North Coastal San Diego area including Del Mar, Solana Beach, Rancho Santa Fe, Cardiff by the Sea, Encinitas, Leucadia, Olivenhain, Carlsbad, La Costa, Aviara, Oceanside, Vista, San Marcos, San Elijo Hills, Escondido and San Diego County.

Credit Scores: What's Important to Know Now?

Credit Scores: What's Important to Know Now?

FICO  FICO  FICO  FICO 

Your good credit may be taking a beating even though your score has not changed. 
Lenders have tightened up the requirements by 120 points in some cases.

The Wall Street Journal had a great article on Credit and Credit Scores.  Here are some of the things covered there.
Paying off your cards each month may not give you the best score possible.
Taking advantage of reward cards may affect my creditworthiness.
One 30 day late will ding your credit for a year.
Your credit report stays with you for life.
The score I pay for or get for free may not be my real score.

Check out the article for more information at
http://online.wsj.com/article/SB10001424052970204348804574400700026852702.html#articleTabs=article

Your score does make a difference.
This is on a 30 year, $300K, fixed loan on 9/11/09
FICO        APR       Mo. Pmt.
760-850    4.768%    $1,568
620-639    6.357%    $1,868

Another interesting article from the San Diego Union Tribune talks about how much damage is done to your credit score with a Loan Modification, short sale, foreclosure or bankruptcy.

http://www3.signonsandiego.com/stories/2009/sep/13/nations-housing-kenneth-harney/?home

Want more info on credit scores, call or e-mail me and I can e-mail you more info.
Dennis Smith, ABR, SRES, e-PRO, CDPE, Realtor® DRE# 00476662
Certified Distressed Property Expert
Taylor Place Real Estate  760-436-0087
http://SanDiegoHomes4u.com