Dulles VA Short Sales Your Northern VA Short Sale Expert

While short sales and foreclosures are both harmful to one’s credit, experts in the industry say that a short sale is less harmful. 

A short sale shows up on a credit report as a “pre-foreclosure in redemption” and affect credit scores by around 100 points.  Foreclosures often show up on credit reports as “debt discharged due to foreclosure” and typically harm ones credit score by around 250 points. 

This difference can effect how quickly a person will be able to qualify for a future mortgage. 

Source: Dual upside to foreclosure alternative, (The Early Show (CBS), June 21, 2007).

What Is A Short Sale…  A short sale is when a bank agrees to accept less than what is owed on a property.

Are There Any Consequences?  Yes.  If not, everyone would be pursuing short sales.  Here are a few potential consequences…

1.  Your Credit Will Be Damaged.   The question of how bad will remain to be un-answered and can depend on how it is reported to the credit bureaus by the lender, how long the short sale takes, and how the credit regulations change over time.

 
2.  The Bank Could Reject Your Short Sale.  The bank is not obligated to accept your short sale.  There are a variety of reasons they could choose to deny your offer.  It is believed and has been my experience as a Realtor that many short sales are now being accepted compared to those being denied. 

3.  The Bank May Ask You For Re-Payment Of The Deficient Amount.  As banks are loosing money on each short sale that is being processed it is not uncommon for them to request repayment of the full amount of what they are being shorted or a percentage of the amount.  This can also happen with foreclosures so this is not a reason to dodge a short sale. 

If a bank does not request repayment prior to or at the time of settlement they do legally have the option of pursuing that debt for a matter of time.  I have been able to negotiate that debt down dramatically for my sellers with the last 3 banks I have worked with.  This is called a deficiancy judgement.

4.  You May Have To Pay Taxes On The Deficient Amount.   If the bank does not file a deficiancy judgement against you for the settled amount you may be asked to pay taxes on the amount you shorted.  Understand that uncle sam views the forgiven debt as free money (aka… un-taxed money). 

If you are considering a short sale and how it may affect you, feel free to contact me. 

A short sale is in many ways like surgery. 

It is not a homeowners best option… Their best option is always paying their mortgage.   However, depending upon one’s circumstances, it may be their only option. In this light a short sale can be healthier than foreclosure or bankruptcy. 

When Should One Consider A Short Sale?

• You should consider selling your home short if you have sought to modify your loan with your bank to make the payments more affordable but were unsuccessful.
• You should consider selling your home short if you are no longer able to make your mortgage payments due to financial hardship such as a job loss.
• You should consider selling short if you are missing payments and will be foreclosed upon by your lender if something does not change. 

Each of these situations are unique and do not always justify a short sale.  These are simply reasons to consider a short sale. 

To understand short sales in greater detail and to discuss your homes value contact me!