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This eBook will provide you with information about how to avoid foreclosure in Virginia, explain the effects it can have on you and your family, and offer other options that may be available to you.
I can help with foreclosure prevention and foreclosure services
Feeling like there is no other option but foreclosure can be an overwhelming experience. Know that you are not alone. Thousands of homeowners in the United States are facing the same challenges as you every single day. Now more than ever before there are solutions.
You need help, guidance, and someone who understands the difficult choices you are facing about your home, your family, and your life. Quite often a homeowner facing foreclosure thinks they have to go through the process alone, forced into a daunting situation caused by unforeseen circumstances beyond their control.
Key Reasons to Avoid Foreclosure
Minimizing damage to the credit.
Foreclosure and bankruptcy are public records that cause fatal damage to credit scores (foreclosure up to 7 years and bankruptcy up to 10 years).
Maintaining control and integrity.
Eviction is an unpleasant experience where the borrower is forced to lose the house against his/her will.
Ways Foreclosure Can Affect You
Credit History
A foreclosure will remain as a public record on a person's credit for 10 years or more.
Current Employment
Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure, in many cases, is ground for immediate reassignment or termination.
Future Employment
Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment.
This eBook will provide you with information about how to avoid a foreclosure, explain the effects it can have on you and your family, and offer other options that may be available to you. This includes a short sale, and I can help you determine if you qualify.
There are options you can take when facing foreclosure. There is no magic solution that should be used in every situation, so it is important to understand the different options.
Option 1 – Reinstatement
Reinstatement means that the loan is restored and put back in place. In order to accomplish this, the homeowner has to pay all monthly payments missed while in foreclosure in full plus all the late fees and legal fees.
Option 2 – Pay Off / Refinance
The loan can always be paid in full at any time up to the foreclosure sale. In some states, the homeowner can even reclaim the property several weeks after foreclosure. Refinancing is typically difficult since the homeowner's credit is damaged from the foreclosure process.
Option 3 – Deed in Lieu
This means that the homeowner gives the deed back to the bank. It is reported differently than a foreclosure and is less severe. In certain situations, the bank will even give the homeowner “cash for keys”
Option 4 – Credit Counseling
Credit counseling is typically for unsecured debt but in some instances, the reason the homeowner is in foreclosure is because of high credit card bills and/or medical bills.
Option 5 – Forbearance
Forbearance is an agreement between the bank and the homeowner to postpone the foreclosure as long as the homeowner takes certain actions. The amount owed is typically put on the back of the loan.
Option 6 – Partial Claims
Partial claims are only available to homeowners with an FHA loan and that meet the HUD (Department of Housing and Urban Development) guidelines. The homeowners are given an interest-free loan by HUD and it is paid off when the mortgage is paid off or the property is sold. The loan is reinstated when this option is chosen and this option can be combined with other options like forbearance and Chapter 13 bankruptcy.
Option 7 – Loan Modification
A loan modification is simply amending the mortgage. The bank typically extends the loan from 30 to 40 years. It is not a very good option for people that are extremely underwater unless the bank agrees to reduce the principal.
Option 8 – Chapter 13 & 11 Bankruptcy
Chapter 13 and Chapter 11 are reorganizations of debt. Chapter 13 is for individuals and Chapter 11 is for businesses. The most desirable part of Chapter 13 bankruptcy is that it will stop a foreclosure proceeding. The homeowner must have a viable income to make this option work.
Option 9 – Chapter 7 Bankruptcy
Chapter 7 is when the debts are discharged completely when a person is unable to make payments. The court will take non-exempt assets from a person to pay off as many debts as possible.
Option 10 – Short Sale
A short sale is when the bank agrees to take less than what is owed and the house is sold at a discounted amount. It is a great option for someone that wants to sell the house but cannot due to being “underwater” and owe more than what the house is worth.
In Conclusion
Taking action and choosing an option early on in the foreclosure is the smartest move. This gives the homeowner time to explore all the options available to them and make the right choice.
1. What is a Short Sale?
A short sale is a transaction that allows the sale of a property for an amount less than the amount owed to the bank. The bank in return accepts the proceeds as settlement of the debt.
How long does it take to close a Short Sale?
It depends on the property location, the lender, and other factors, but in general, a short sale can take anywhere between 3-6 months.
What happens to the seller’s credit rating when they short sell their property?
Typically the loan will show up as "paid" on their credit report; however, there will be a notation that says "settled for less than originally owed" or something along these lines. It is more favorable for a homeowner to short sell than to have a foreclosure or bankruptcy on their credit report. A short sale will affect the credit of the seller for 1-2 years whereas a foreclosure or bankruptcy will affect the seller’s credit for 7-10 years.
What documents does a seller include in a Short Sale package?
Documents depend on the lender. Each lender has different requirements. It is typical to require an Authorization to Discuss for the Agents, a hardship letter, purchase and sales contract, settlement statement (HUD 1), pay stubs, bank statements, and personal financial sheet (monthly budget), amongst other things.
Are there differences if the property is Vacant or Occupied?
A primary residence may receive a Relocation Allowance, a vacant home is not eligible for the Relocation Allowance.
How late in the pre-foreclosure process can you start a short sale?
Most lenders require to have a COMPLETE package to them at least 30-45 days prior to a scheduled foreclosure date for them to consider the short sale option.
Will the borrower have to pay taxes for a Short Sale?
The borrower may pay extra income tax if the bank sends a 1099 for the deficiency. If the subject property is the borrower's Primary Residence then the taxes on the 1099 will be calculated based upon the Mortgage Forgiveness Debt Relief Act of 2007 HR3648.
How Does the lender determine the property value?
It is a lot like an Appraisal only not as extensive and is performed by a Real Estate Agent. An Appraisal is performed by a licensed Appraiser. Some banks just order a BPO (BPO stands for Broker’s Price Opinion). Others will just order an Appraisal. Sometimes both are ordered. It varies depending on your lender or the type of mortgage you have.
Can an owner profit from a Short Sale?
The seller cannot profit (monetarily) from a pre-foreclosure short sale.
How do bankruptcies affect the possibility of doing a short sale?
Most mortgagees won't consider a short sale if the homeowner is in bankruptcy...why? Because negotiating a short sale payoff is considered a collection activity. Collection activities are prohibited in bankruptcy.
Download my FREE eBook to see how a short sale can help.
A homeowner who loses a home to foreclosure
Credit score drops 250 to over 300 points
Affect the credit score for over 3 years
On report 10 years or more
After a successful short sale
Credit score drops as little as 50 points
Affects the credit score as brief as 12-18 months
Doesn't show on report
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1-800-369-9051
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