Whats the difference between foreclosure & short sale?

Discussion in 'The Okie Corral' started by mixflip, Feb 17, 2010.

  1. mixflip

    mixflip

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    I know your credit score is jacked up either way but what is the biggest difference in the two?

    I heard a short sale supposedly impacts your credit less?

    Foreclosures take a long time to process and they can still come after you for repayment technically? I think they can do the same with short sales too as far as collecting the balance in some states?

    I have neighbors all around me that havent paid on their houses for over a year and still not eviction letter? Some have already saved up enough money for a down payment on a new house or condo?

    I am sure someone one GT has lived through a foreclosure and another has lived through a short sell?
     
  2. OXCOPS

    OXCOPS

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    http://homebuying.about.com/od/foreclosures/f/072509_Short-Sale-vs-Foreclosure.htm

    also...

     

  3. AWJGlock19

    AWJGlock19

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    short sale = "approved sale by your lender that is for less $$$ than what is owed"

    foreclosure = " can't make your payments and lender takes possession of your property and avicts you"

    not sure about impact on credit, although both would be bad.
     
    Last edited: Feb 17, 2010
  4. GreenDrake

    GreenDrake Rip Lips

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    Short sale is better on credit than foreclosure. As well, you can rebound in a couple years to get conventional financing, not so easy with foreclosure.
     
  5. Flying-Dutchman

    Flying-Dutchman

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    Why are they saving up for a downpayment?

    Who is going to give them another loan?

    Would you give them money and expect they would pay you back?
     
  6. GreenDrake

    GreenDrake Rip Lips

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    Unless they get owner carry terms, foreclosed people cannot get conventional financing for five years now. Used to be three, plus they take a 300 point credit hit. Good luck with that dream.
     
  7. dahahn

    dahahn

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    OK, I take issue with that quote saying that a short sale is a "win-win." It is absolutely not.

    Most people here who have a mortgage, or not, I have no clue, pay PMI. A lot of mortgagors, I should say, pay PMI. What do you think makes up the difference in the "short" bit of the sale? PMI insurance claims. So when a house is sold short, and they have to make up the difference, PMI goes up, and that impacts all mortgagors across the board who pay PMI.

    I used to work at Wells Fargo Home Mortgage as a Collector, so I know a tiny bit when it comes to this stuff, but definitely not enough. I can say that while I worked there (which happens to correlate almost exactly with the housing downturn!) I watched PMI increase every year, and the number of short sales and foreclosures went up as well.

    Good luck. We reported every 30 days what the situation was, and when foreclosure proceedings started (anywhere from 3 months on a FHLMC loan to 7-9 months on a VA loan) we reported as such. As a result, their credit tanks big time, so good luck to your neighbors trying to get another place. No one will finance them. Requirements on credit went from the high-500 (sub-prime), low-600 range to the mid 700 range (when everything was going down housing wise). If you're 90-days behind...good luck.

    If you have any questions, I would be happy to answer them based on my time at WF. Or if anyone has questions about their WF mortgage I can try to help. I haven't worked there for a few years, so I might be a bit rusty.
     
  8. noway

    noway

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    but don't forget the lendor get's to write off some these issues ( short sale or FC ), so they do win more with the short sale.
     
  9. Adjuster

    Adjuster

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    How do they get the statement 'the buyer purchases the home for a reduced cost'. That is not true to my knowledge. The buyer purchases the home at current market value. It is simply the market value is now less than what the home was worth previously or less than what is owed for the home.
     
  10. mixflip

    mixflip

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    Sorry I misrepresented that one statement. My neighbors arent saving up for a new house per se'. What I meant was they have saved up alot of money to the point that they could potentially buy another house or condo? Which obviously they cannot due to their credit scores.

    Now they probably could have their parents buy a 2nd home and live in it and pay the mortgage until the 5 years (or what ever it is now) is up and then transfer the title into their names? (or inherit it if they pass away)

    So a short sale sounds better than a foreclosure. Both suck but the lesser of 2 evils I guess. So in short...I would have to talk to my lender, get a short sale specialist/realtor and have them find a buyer lined up, then go to back to the lender and see if they agree? My only fear is that there are soooooooooo many short sale homes in my town that it may not get sold for years due to a flooded short sale/foreclosure market?

    I am not there yet but if I get another furlough day I might be?
     
  11. GreenDrake

    GreenDrake Rip Lips

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    You will have to pay the capital gains on the difference in a short sale, not that big of a deal but something to keep in mind.
     
  12. dahahn

    dahahn

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    How could I forget that? Thanks! I totally forgot it.

    It's not a big deal until you pay capitol gains taxes on $75,000. If you bank for it, it's not a big deal at all, but think of a majority of folks that are in this situation. They didn't bank on it...all of the sudden they owe a LOT of money.

    If you are stuck between the 2, the short sale is the best, but a lot of times the servicer (chances are the lender has nothing to do with your mortgage) will sit on the paperwork or reject it. OR you can't find a suitable offer.

    At that point remember there's a third option: deed-in-lieu of foreclosure. At Wells Fargo we has the "Cash For Keys" program. I only found it after some digging, they don't tell the collections reps that it exists. Cash For Keys is a good program. It can give you some money to get back on your feet AND it protects the real asset. They won't give you money if you tore out the copper piping, but they will if the house is in decent shape.

    I hate banks (esp after working at WFHM), but I hate deadbeats and jack***es more. I can't tell you the number of people that called looking for a short sale. "Have you had the home on the market for 90 days? (a requirement at WFHM)" "No, we just don't really like the area and we haven't gotten any interest in the 2 weeks its been on the market." NO. YOU DO NOT GET A SHORT SALE. Your house has been on the market for 7 months and you are out of savings? Let me help you with your short sale...If you have done your due diligence, then I will help you as much as I can. If you are asking about deed-in-lieu because your house lost value, don't waste my time.
     
  13. jdavionic

    jdavionic NRA Member

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    Rather than start a thread with a related question, I thought I'd post the question here. We have a neighbor that is a real PITA. They put the house on the market last week and it's a short sale.

    I'm not interested in buying it. Just wanted to know - does this mean that he will be gone soon? I've read that banks will allow you to list the home as a "short sale" for a limited amount of time. If it doesn't sell, then they move into foreclosure since you must have been unable to make payments to qualify for a short sale.

    Is that true? Can you give me an idea on how much longer we will likely have to deal with this guy?
     
  14. Glocks&Ducs

    Glocks&Ducs

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    Is it really considered capital gains? I understood it to simply be considered taxable income. Capital gains runs out after three years, doesn't it? Whereas if you did a short sale, that difference in owed to sale amount would still be charged on your taxes, even if it is past the capital gains window.
     
  15. ExxoticOne

    ExxoticOne

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    From my own personal experience it has been easier and faster to purchase foreclosed properties over short sales.
     
  16. NAS T MAG

    NAS T MAG

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    If you have a "paid for" house that is similar to a house in your area that was sold on a short sale can you get your real estate taxes lowered baised on the selling price of that property?
     
  17. jdavionic

    jdavionic NRA Member

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    How long will a bank allow the seller to be in a short sale situation before moving into foreclosure?
     
  18. Glocks&Ducs

    Glocks&Ducs

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    I doubt it, unless it becomes a trend. Not to mention, I have already found out that both tax and insurance companies don't take "recessions" into account when it comes to lowering your rates. Hell, matter of fact, this past year saw the biggest jump ever for my tax value. Ever since I bought the house, it has only gone 3 or 4 thousand dollar spurts every 4 years. This time it went up by a difference of about 15 thousand all at once. But I will say that the housing market crash hasn't really affected our area too much. Too many military people buying and selling as they change duty stations.
     
  19. Glocks&Ducs

    Glocks&Ducs

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    I think there are too many variables to accurately answer the question.
     
  20. TurboRocket

    TurboRocket

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    The forgiven portion of the loan may have 1099 consequences, or possibly not. Check --> http://www.irs.gov/individuals/article/0,,id=179414,00.html

    Lender will typically not stop or slow down foreclosure process until they feel it is solidly in contract, buyer is approved, appraisal done, etc., etc. In some states, if they pull the foreclosure, the clock starts all over again if the short-sale does not go through. Short-sale process are simply proceeding in parallel until lender decides it is better for them to go one way or the other.

    The pre-foreclosure process usually continues for months and months. However, when the foreclosure date finally gets scheduled, it will be public record. So, check with local county auditor's web site to see how long you have to deal with your neighbor.

    There is no "eviction" prior to the foreclosure sale itself by the county sheriff or whomever is designated. Thereafter, the deputy sheriff will do the evicting on court order, probably around 30 days after the foreclosure sale is certified.

    Short sales are difficult to buy now because the lenders are so back-logged.