Foreclosure Fears Go Way Beyond Losing A Home!

Sarasota foreclosure prevention (or foreclosure prevention in Anytown, USA) must help distressed homeowners understand the glaring differences between foreclosure and short sale. What’s best for (you) is not one-size-fits-all – rather, your situation requires an informed real estate attorney, short sale realtor and tax professional.

What you must know is that losing your home to foreclosure-as horrible as it is-might not be the end of a stressed out period in your life. To a shocking degree, foreclosure is biting some people really hard…after they lose their homes.

No doubt, foreclosure emotionally cripples some people, whose struggles appear unbearable. Chances are, there’s loss of job; loss of income; and loss of sleep. For many people to whom I talk, they feel alone.

Some are too embarrassed to talk about saving their home.

The other day, I met a middle-aged couple with 3 kids. They’re scared to death of losing their home. Both have been laid off & now working “get by” jobs, barely providing income enough to support the family’s basic needs.

They have nowhere to go. A failed attempt at loan modification now leaves them with no choices…or so they think.

They think the best option is to walk away from the “mess” – that the further they go to get away, the less painful foreclosure and/or the loss of the home will be. Certainly, I can understand that thinking. I am a Sarasota Realtor, and I have stared foreclosure in the face…two times on 2 investment properties.

I eventually avoided foreclosure, short selling both properties and realizing the same benefits I’m about to share with you.

This couple, as with many other property owners, knew nothing of short sale or the differences between short sale and foreclosure. Once I explained the differences, I encouraged them to talk with an informed real estate attorney and tax professional about the best option for them.

Clearly, differences (and BENEFITS to homeowners) exist between foreclosure and short sale (with more differences occurring daily):

  • In my mind, the most serious damage from foreclosure comes from debt collectors AFTER foreclosure: in judicial foreclosure states such as Florida, Sarasota foreclosures leave borrowers facing judgment creditors who can take legal action against you for up to 5 years and then pursue collections for up to 20 years! This means, a judgment creditor can get court’s permission to GARNISH your wages according to state limits and/or LEVY your bank accounts. Beyond the emotional pain, by far debt collections AFTER foreclosure is the pain that doesn’t go away.

  • Successful short sale allows you to start over without debt collectors chasing you for deficiency amount (that is, debt collectors who attempt to collect the difference between what you owe and what the house eventually sells for + interest & fees). Successful short sale is defined as “FULL PAYOFF & SATISFACTION OF MORTGAGE.” You need an attorney to review any short sale approval.  

  • Foreclosure blackballs you from buying another (primary) home with Fannie Mae financing for 5 years. If you short sell the property, you can utilize Fannie Mae in 2 years.

  • If you’re an investor, foreclosure blackballs you from Fannie Mae for 7 years. Short selling allows you to get Fannie Mae financing in just 2 years.

  • Foreclosure (from my experience observing many credit reports) hits your credit for 250-300 points, mostly due to mortgage payment LATES. It is LATES that hurt when short selling as well. However, credit scores (provided other bills are paid as agreed) rebound much faster…often recovering with 12 months.

  • Foreclosure is the most challenging issue against a security clearance, should you need a security clearance per your job requirement. If you are a police officer, in the military, a government employee or in any position that requires a security clearance, chances are your clearance will be revoked once the foreclosure is discovered on your credit reports and you will be terminated in accordance with terms of your employment. Of course, this is shocking news, especially if you never had considered the possibility years ago when you were hired and all was well. A short sale on its own does NOT challenge most security clearances (as explained to me by one personal injury and one civil rights attorney).

  • Foreclosure is possible grounds for immediate termination from your job. Short sale, on the other hand, typically has no effect on your employment.

  • Foreclosure seriously (may) affect future employment (ugly credit results), though short sale is NOT reported on your credit reports.

Please don’t walk away, even if the property is not your primary. It’s not the “better” credit reporting short sale provides versus foreclosure. It’s not the Fannie Mae policy allowing you to buy another house in 2 versus 5 years. Rather, it’s the opportunity to avoid deficiency judgment, something that hangs on for up to 20 years in Florida!

Sarasota foreclosures create tragedies, sometimes unnecessarily. Before you consider walking away, please consult with a real estate attorney who specializes in foreclosure prevention. You need to understand your options according to your state’s foreclosure laws. You also need to understand any potential tax consequences.

 

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