Wednesday, April 15, 2009

Do Not Let Your House Go To Foreclosure Without Taking Every Step To Prevent It.

If you owe more than your property is worth, you have as a Distressed Property. Until recently, working with Distressed Properties was fraught with peril for agents, and owners were often told to “let it go”, ie.- stop making payments and let the lender foreclose. We’ll spare you the horrific Short Sale experiences as well as our speculation as to why the lending industry was so slow to adapt to the need to cooperate with home owners and their agents. Times have changed and Short Sales are now viable and should be given serious consideration.

Unknown to most of us until about 18 months ago, Short Sales are now very common, and it is very important to understand their benefit to the homeowner. Consider some of the following differences between the effects of a Foreclosure versus a Short Sale:

Credit Score: A Foreclosure will lower your credit score 250 to over 300 points for over 3 years. A Short Sale will show late payments, but the score will be lowered as little as 50 points, and the affect can be as brief as 12-18 months.

Credit History:
Foreclosure will remain on credit history for 10 years or more. Short Sale is not reported on a credit history as there is no specific reporting item for “Short Sale”. Foreclosure remains on public record forever as it is recorded.

Employment: Employers often actively check credit of employees in sensitive positions – especially security clearances (Military, Police, Public Communication, Public Utilities, etc). Foreclosure can result in immediate reassignment or termination if employed, or can prevent you from being hired if you are looking for work. A Short Sale is not reported on credit report … is not a challenge to employment.

Deficiency Judgment: In a Foreclosure the bank has the right to a deficiency judgment. Some successful Short Sales provide for the lender to give up the right to a deficiency judgment. If a deficiency judgment is pursued the Short Sale’s higher yield from the sale results in a lower potential judgment amount.

Future Fannie Mae Loan: After Foreclosure you’ll be ineligible for a Fannie Mae backed loan for 5 years. Short Sale - 2 years.

Future Loans:
For 7 years you will be asked on your application if you have had a foreclosure, but there is no similar declaration regarding a Short Sale.

Our Advice: There is now a designation known as Certified Distressed Property Expert that has been earned by local real estate agents to help Sellers and Buyers of Distressed properties. If you have cash flow or moving issues, we suggest you get professional help to assess your situation, determine alternative options, and make an action plan. The world of Short Sales and Foreclosures has changed from the frustrating mass confusion that it was to today’s smoother processes with positive results. Though there is still frustration and emotion, help is available to you that can help you establish and achieve your goals through the confusing maze.

Whether getting the financial elephant off your back, moving to put the family together, or other bona fide reason for selling … if you have a Distressed Property get with a Certified Distressed Property Expert and take control of your future. Foreclosure is the last option…do what you can to avoid it.

When it comes to choosing professionals to assist you with your real estate needs…
Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates, 775-781-5472,,


Anonymous said...

Hello Lisa and Jim,

I would really appreciate the answer to these two questions:

Q1. Does a lender that has foreclosed on a home have the right to sell the home for any amount they wish, no matter how small the amount, and then pursue a deficiency judgment against the former homeowners or do the lenders have to sell the home for a minimum amount that reflects the home's current market value?

Q2. Once a lender has foreclosed on a home and has been awarded a deficiency judgment against the former homeowner, can the lender garnish the wages of an individual or are they required to agree to a mutually acceptable payment plan?

Thank you in advance for your answers to these two questions which I'm sure a lot of other individuals would also appreciate.



Gerry said...

Foreclosures can be tricky situations which can be difficult to find ways to prevent them. There are options out there for debtors who find themselves facing a foreclosure sale. The best thing to do is consult an attorney to solve the matter especially if the matter does not yet get worse.

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