Credit Implications/Bankruptcy/Short Sale/Foreclosure

Obviously late payments are damaging upon your credit score. By the time the foreclosure process ends a homeowner may have missed a year's worth of payments, if not more.

By successfully negotiating a short sale, homeowners can salvage as much of their credit score as possible. Yes it is true that the some lender will reserve the right to report this transaction to the appropriate credit bureaus which may negatively affect the homeowner's credit.  However, as previously stated, a short sale pales in comparison to the destruction of a completed foreclosure.

Typically clients are concerned about the timeframe necessary to rehabilitate their credit so as to qualify for a mortgage in the future. The only reliable data we can gather has been based upon the information provided by our prior clients; credit may be restored in as little as eighteen months. However long the timeframe may be, it is certainly less than it would have been had the foreclosure action concluded. Contrary to what the lenders will tell you, the homeowner does not need to be in default in order to be considered for a short sale!   The reason the bank will tell you this is because they want you to try to make as many payments as possible. We have closed many transactions where the homeowner never missed one payment. This is the best way to preserve as much of your credit score as possible. 

It has been our experience that some clients have declared bankruptcy as a last resort, unaware of an alternative. If you believe that bankruptcy is in your best interest, we strongly suggest consulting with an attorney so that you can make an educated decision as to your best course of action.

The Positives & Negatives 

We are facing challenging times, and its important to understand that most short sale homeowners have not done anything wrong. Typically they purchased the home within the last three years, financed with a high percentage of the purchase price and perhaps closing costs, if not all (i.e. 100% financing with a seller's concession). Since that time, prices have dropped significantly in value, leaving the homeowner with few options if they wanted to sell or refinance. 

Possibly many homeowners may not have understood the terms of the mortgage or was fraudulently induced into predatory subprime loans.

Whatever the reason, it is crucial to understand that foreclosure should be a last resort and avoided at all costs. There is always an opportunity to rebuild both your finances and overall quality of life.