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Short Sale v Foreclosure: Using a Short sale to Avoid Foreclosure in Florida

Topic: Foreclosure

Selling your home via a short sale is an increasingly popular method that homeowners in south Florida are utilizing to avoid foreclosure, and many homeowners want to study the benefits of a short sale v foreclosure. Short sales - transactions where a home is sold for less than the outstanding mortgage amount - increased 49 percent in South Florida last year. In fact, there were 16,800 short sales in Miami-Dade, Broward and Palm Beach counties in 2010.

The foreclosure process in Florida can be lengthy, so homeowners have plenty of time to explore their options to avoid foreclosure. When you are thinking about foreclosure v short sale, there are four or five main points to consider: the effect on your credit, the effect on your employment, whether you will be stuck with a deficiency judgment and how soon you will be able to buy another home.

Many people mistakenly think that once they are in foreclosure, their credit is so bad that the issue of short sale v foreclosure is irrelevant. Sure, your credit does take a hit when you stop making payments, but if you let your home go into foreclosure, you have two extra problems with your credit.

Firstly, your credit report will show your foreclosure for seven long years. You can rebuild your score, but having "foreclosure" on your credit report is a big black mark that makes creditors consider you a far greater risk than if you did a short sale. A short sale will show that you were someone who took action to avoid foreclosure, and someone who cared about your finances. Bad credit can stop you from buying a car or getting other credit and it could cost you thousands every year in higher repayments.

The second problem that really messes up your credit with foreclosure is that you will be stuck with a deficiency judgment. This is another black mark on your credit, and if your credit report shows you still have a debt for tens of thousands or hundreds of thousands of dollars; it also makes it hard for you to rebuild your credit score.

That of course brings up the other question of deficiency judgments when considering a short sale v foreclosure. Will you also be stuck with a deficiency judgment if you do a short sale? That depends. If you have a genuine hardship and it is your principle residence, and you have an experienced Realtor who negotiates to have your mortgage debt considered a full settlement, then you will be able to walk away free. In Florida, banks have up to five years after a foreclosure to sue the homeowner for the difference between the outstanding mortgage and whatever is generated at a foreclosure auction.

One question few people think of when considering a short sale v foreclosure is how it could affect their ability to rent. Many landlords and apartment buildings do not rent to people who have let their home go into foreclosure, so that makes it harder to find alternative accommodation when it comes time to move.

What about employment? Do you have, or might you in the future, a government job or position in financial services where your employer considers your credit and won't hire you if you have a foreclosure? We are helping someone do a short sale right now because if his home goes into foreclosure, he will lose his job. In this area, the question of short sale v foreclosure is very clear. Do whatever is necessary to avoid foreclosure.

The last thing to consider in this issue of short sale v foreclosure is whether you may want to buy another home in the next five years, especially now that home prices have dropped by two –thirds in many places in south Florida. No bank is going to want to give a mortgage to someone who did nothing to avoid foreclosure. Fannie Mae recently announced it would ban strategic defaulters from getting new loans for seven years. With a short sale, it is possible to get a new mortgage in as little as two years.

So, when considering a short sale v foreclosure, the advantages of a short sale to avoid foreclosure are clear. Do whatever you can to avoid foreclosure.


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In a short sale, you are asking your moaggrte company to accept the proceeds of the sale as full settlement of your debt. This is better than a foreclosure, but is still a partial forgiveness of the debt. A less damaging option may be to convince the bank to allow the sale and give you a loan for the difference. Unless you can afford to keep the house, you are better of with one of these options.
read more... 12/19/2012

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