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There is an advantage to working with a Realtor that is familiar with the foreclosure/short sale process. Bank owned homes are still playing a big factor in the market today and the Williamson Realty Team has the experience and tools needed to help you find an excellent deal with instant home equity on a foreclosed home in Dallas.
What is a Real Estate Short Sale?
A real estate short sale is when the your
mortgage bank/service’s investor has agreed to take less than what is
owed.
A short sale is a foreclosure alternative.
Short Sale vs. Foreclosure
Short Sale vs. Foreclosure
Below is a table to help break down the difference of how a
foreclosure and a short sale will effect you.
Issue |
Foreclosure |
Successful Short Sale |
Credit Score |
Foreclosures are a public record similar to
a bankruptcy and usually can affect your credit score by lowering it
175 to 300 points. As a public record it will stay there for 7
to 10 years. |
Short sales do not show up under public
records and once the short sale is completed successfully, all that will
show on your credit will be the late payments to the mortgage and the
statement “settled for less than full amount due” (or similar verbiage).
Depending on the rest of your credit, the score may only be affected by
as little as 50 to 60 points. |
| Credit History |
Along with the late payments, the
foreclosure will remain as a public record your credit history for 7 to
10 years. |
Only the late payments will be reported on
your credit. The short sale will appear the same as a charge off on a
credit card and will be reported as “settled for less than full amount
due” (or similar verbiage). |
| Future Home Purchase (Primary
Residence – Fannie Mae Loan) (effective May 21, 2008) |
Per Fannie Mae, individuals losing a home
to foreclosure will not be eligible for a Fannie Mae loan for a time
period of 5 years. |
Per Fannie Mae, if an individual completes a
short sale they will be able to purchase a home after 2 years
(depending on credit score and how they have maintained the rest of
their credit) |
| Future Home Purchase (Non Primary
Residence – Fannie Mae Loan) (effective May 21, 2008) |
If an individual loses an investment
property to foreclosure they can not buy another investment property for
7 years under current Fannie Mae guidelines. |
Per Fannie Mae, if an individual completes a
short sale they will be able to purchase a home after 2 years under
current Fannie Mae guidelines. ** |
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** NOTE – Fannie
Mae is currently the largest insurer of residential mortgages with
Freddie Mac as the second. Freddie Mac’s guidelines are typically the
same as Fannie Mae.
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| Future Loan with any Mortgage
Company |
When completing a loan application in the
future for a purchase of a home the borrower will have to answer YES to
the question (C, section VIII) “have you had property foreclosed upon or
given title or deed in lieu thereof in the last 7 years?” For those 7
years the type of loan or rate you receive may be affected by this. |
There is no question related to short sales
currently on a loan application. ** |
| Deficiency Rights |
Depending on the type of loan, California
laws allow for the lender in some instances to pursue the homeowner for a
deficiency. (Consult an attorney for up to date laws) |
As part of the negotiation process, in most
cases we are able to have the lender agree to release the homeowner for
any future deficiency. |
| Amount of the Deficiency Judgment |
In a foreclosure, the final sales price is
lower than in a short sale and the fees involved for the bank are
higher. If the lender does have deficiency rights, this can result in a
higher amount that they will be able to pursue.* |
The sales price in a short sale is
typically at market value or just below. In most cases, the amount of
the right off is smaller than in a foreclosure, which would result in a
smaller amount that the lender could pursue if a deficiency judgment was
available. * |
| Taxes |
At the end of the year the lender will
provide a 1099-A which reflects the amount they have written off. This
will show as income to the homeowner. The homeowner may or may not be
responsible for paying taxes on this income. Insolvency may be an
option to the amount forgiven (Consult an accountant or attorney for
more information) |
At the end of the year the lender will
provide a 1099-C for the amount they have written off. This will show
as income to the homeowner. The homeowner may or may not be required to
pay taxes on this income. The Mortgage Relief Act of 2007 protects
many homeowners that have done a short sale. Homeowners may qualify for
this, or insolvency may be the other option. (Consult an accountant or
attorney for more information) * |
| Current Employment |
Employers have the right to check the
credit of all employees who are in sensitive positions. In some
positions, a foreclosure may be grounds for reassignment or termination. |
A short sale is not a public record and is
reported separately on a credit report. The employer will only see late
payments and an account that has been settled. This shows that you
worked with the lender towards a resolution and typically looks much
better to the employer. |
| Future Employment |
Most employers check credit histories of
future employees and some (depending on the sensitivity of the position)
will not allow for a foreclosure on a future employees record. If an
individual is currently employed sometimes it could mean grounds for
reassignment of termination. |
The short sale will not show as a “public
record”, it will only show on the credit as late payments and “settled
for less than full balance” (or something similar). This shows to the
employer that the future or current employee worked with the lender
towards a resolution and typically looks much better to the employer. |
| Security Clearances |
Foreclosure can be a challenging issue
against a security clearance. If an individual is a police officer, in
the military, CIA or any other position that requires security
clearance, in most cases security clearance will be revoked and position
would be terminated. |
A short sale by itself does not challenge
most security clearances. |
** The information provided is
for informational purposes ONLY. It will serve in a
starting point to further investigate how a short sale or foreclosure
may effect you. We HIGHLY RECOMMEND that you consult a CPA/tax advisory and/or and attorney regarding your specific
situation BEFORE you consider a short sale, deed-in-lieu-of-foreclosure
or foreclosure. **
Williamson
Realty Team serves the entire Dallas/Fort Worth Metroplex.
We have Local Real Estate
Agents that are home buying specialists in the following areas:Denton
County Homes
in Argyle, Justin, Flower Mound, Lewisville, Corinth, Denton, Highland
Village, Lantana, Double Oak, Bartonville and Little Elm.
Tarrant/North Denton
County Houses in Keller, Haslet, Bedford, Euless, Southlake,
Colleyville, Melissa Texas, Trophy Club, North Richland Hills and
Grapevine. We also
have agents
in the Collin County Area that focus on the home buying experience
Frisco, McKinney, Allen, Richardson, Anna, Fairview, Prosper and Plano.
Dallas County Homes
for sale in areas include Dallas, Richardson, Rowlett, Addison, Coppell,
Carrollton, Irving, Dallas, Garland and Mesquite.
Interested in buying a short sale or foreclosure property in the Dallas, Denton or Collin County area?
Fill out the form below and we will contact you with the most current foreclosure or short
sale listings that meets your search perimeters. Its quick, easy and no obligations.
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