Almost back from vacation and wondering about something

[SD Realtor]

Greetings all… I am ALMOST back from vacation. Flying home tomorrow and got a bit of free time this afternoon so I am getting back to old habits….as long as my wife is still napping I can get my piggington fix in…

I was checking on a notice of default for someone the other day. The property was a cancelled listing that sat on the market for a long time but never sold. It went NOD a few days ago, (about 20k) and the purchase price was I believe 795k.

When I spoke to the listing agent, (the property was in cancelled status as of early March) he told me that when he spoke to the lender, the lender didn’t seem to care if the property was sold as a short sale or as a foreclosure. The lender indicated to this listing agent that the sellers would suffer the same hit to credit in either case.

I found this curious….

Any comments?

[an]

That’s very interesting. I thought the whole point of a short sale is to save your credit. If that’s not the case, then why would anyone do a short sale? I would just live free rent until I get evicted.

[LookoutBelow]

I think your going to see a lot of THAT in the future, hell, they're going to screw over their credit even if they cough up the shortage, so live rent free and save, they're gonna need it after the bank is done with their credit

[SD Realtor]

Yep AN I totally agree. I was always under the impression that a short sale is less damaging then a foreclosure but that was only an assumption.

SD Realtor

[Bugs]

A foreclosure shows up as a foreclosure, whereas a short sale only shows up as a deficiency. Foreclosure is harder on the credit rating.

[Happy renter]

The Affect Of A Short Sale On Your Credit in 3 different situations:

1. If the lender chooses to sue the borrower for the difference of short sale, and the homeowner cannot pay, a deficiency judgment would appear on the homeowner’s credit report, negatively affecting the homeowner’s credit.

2. Often, the bank chooses not to sue. Even when the bank chooses not to sue, the foreclosure can end up showing up in credit checks because it is a public record.

3. If the property owner needs to take a new loan from a bank in order to make up the difference from the short sale, most likely the new credit score will not be drastically different than the property owner’s credit score before the short sale.

My friend took a new loan after the short sale during the last housing down time market. It did not impact his credit at all.

http://www.mortgagenewsdaily.com/wiki/Short_Sale_Credit.asp

[North County Jim]

SDR,

Just by chance, is this house on Hollowbrook in SEH?

[sdrealtor]

The mapping change has been a debacle and we’ll be back with Mapquest by the end of next week. Gotta love the decision makers at the Board.

[TemekuT]

effect! I go crazy when people confuse “affect” and “effect”

sorry, it’s been a long day and week of trying to convince family members to sell now!

[SD Realtor]

Thanks for the input guys!

sdr – yeah that mapping change was BRUTAL.

north county jim – No the house was not there. It was on Manor Lane in Carmel Valley. It shows up as a cancelled listing on the MLS as of early March.

happy renter – thanks for the information.

I believe these sellers are gonna go down with the ship. NOD was filed about a week ago.

SD Realtor

[robyns_song]

I haven’t come across any instances yet where any of the banks have sued for the net loss after the short sale, BUT they do have to approve the short sale amount. If the bank does incur a loss (which they nearly always do), they can write it off, but the borrower has to pay taxes on that amount come April (the amount of the total debt at the time less the selling price, not just the difference in the prirncipal balance)!

[Author]

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