WHEN IS IT TOO LATE?

QUESTION: Mike, I think I might waited to long to get a short sale. How do you know when it's too late?

CRIBBIN REALTY'S ANSWER: In Missouri, the foreclosure process happens quickly, therefore a short sale must be identified before the seller receives a Notice of Foreclosure. Short sale candidates need to identified and counseled before a Notice of foreclosure is received. however, if a Notice has been received recently, there are instances where it still may be possible to get a short sale.

Short Sale vs. Bankruptcy

Lenders cannot consider a short sale if the borrower is in an active bankruptcy. the bankruptcy would have to be discharged or dismissed prior to the lender considering a reduced payoff.

A bankruptcy stays on the homeowners credit report of 10 yrs.

bankruptcies typically only delay the inevitable...a foreclosure. then the homeowner has both a bankruptcy and a foreclosure on their credit report. The worst case scenario for anyone.

consumer bankruptcy filing nationwide continued to rise in January, up 34.4% from a year earlier, according to the American Bankruptcy Institute. this is a barometer to the potential short sale market. One in every 13 seconds...and over half should and could be short sales.

Short Sale vs. Foreclosure

Foreclosure is devastating to one's credit report. Someone who goes the short sale route generally can buy a home in two years, compared with five years after a foreclosure. many employers run credit checks on prospective employees and foreclosure is one of the top items that will put a potential new hire in jeopardy. also, current employers may run credit checks and a foreclosure can put a current position in jeopardy. Security clearances and government positions can be jeopardized by a foreclosure.

The lender can still pursue the former homeowner with a Judgment for any deficiency after the property sells under foreclosure. this deficiency most likely will tack on attorney fees, costs to sell the property, and many other related fees such as property preservation fees, insurance and the like.

Foreclosure effectively reduces your potential clients as buyers as it is rare to secure financing for another home for a long time after a foreclosure is reported on one's credit report.

If you have any real estate related questions or topics that you would like me to discuss here, please email them to: mike@cribbinrealty.com.