First, owners should be talking to their lenders explaining their situation. Those impacted by COVID-19 should check with their cities to apply for CARES ACT funds provided by the state to prevent rental eviction and mortgage foreclosure. For the City of Santee and El Cajon check out this website for more information.
At this time, most people have equity in their homes due to the rise in home prices from the limited home inventory. In this case, it is best to cut your losses and sell rather than let the bank foreclose and lose the remaining equity. Put the proceeds in savings and save for when things are better financially. There will come a time to buy again.
But then there are some out there, where the owner owes more on the house then the home is worth. Known as a "Short Sale". A short sale should be called a Short Pay. The bank loses the difference between what you still owe and what it sells for. Those facing Short Sales and Foreclosures should always consult their lawyers and accountants before listing their homes because there could be tax consequences.
While they are called "Short Sales", it is the furthest thing from a short process. It takes anywhere from 6 weeks to 6 months once an offer is accepted. After the seller provides proof of their financial hardship which includes a letter of hardship explaining why they can't make their payments anymore, as well as the bank reviews their bank statements, tax returns, and retirement accounts. Once the bank determines they will allow the short sale, they will order an appraisal to insure the agreed upon offer is reasonable.
Even though a short sale and foreclosures impact your credit scores, in reality, the short sale shows creditors that the seller took responsibility for the problem and it will impact your credit for normally 2 years versus foreclosures impacting your credit for up to 7 years. These time frames vary depending on the lender, credit score, down payment, and the type of loan.
"According to FICO, if your credit score is 680, a foreclosure will drop your credit score on average to 85 to 105 points. If your credit score is excellent at 780, a foreclosure will drop your score by 140 to 160 points. In other words, the higher your credit score the more it will get smashed!" says financialsamurai.com
"According to FICO, if your credit score is 680, a foreclosure will drop your credit score on average to 85 to 105 points. If your credit score is excellent at 780, a foreclosure will drop your score by 140 to 160 points. In other words, the higher your credit score the more it will get smashed!" says financialsamurai.com
The last thing people in financial crisis want to do is spend more money on a sinking ship. However, when selling a short sale it can actually get multiple offers when the home is clean and free of clutter. When there is trash thrown about and the weeds are growing out of control, buyers have a hard time seeing the potential. Hire a qualified agent who has handled short sales before and who you can trust to guide you through the emotional and challenging process.
--Virginia Hall
--Virginia Hall
San Diego East Foothills Keller Williams Realty