Avoiding foreclosure is always a smart move, but now there are incentives that make it an even better one. Real Estate short sales are more valuable to homeowners than ever!
Short sales and deeds-in-lieu are dignified solutions to foreclosure, and now the government is making them easier and quicker through the Home Affordable Foreclosure Alternatives Program, or HAFA, which also gives qualified homeowner $3,000 for participating.
A Short sale is when the lender agrees for the property to be sold at a price lower than the mortgage balance owed. A deed-in-lieu is when the lender receives the house deed in place of the mortgage balance, although in some cases the lender will still pursue the homeowner for the leftover mortgage balance, which is called a deficiency judgment.
A HAFA short sale or deed-in-lieu prohibits the participating lender from pursuing a deficiency judgment.
THE REAL INCENTIVES
While the $3,000 homeowner incentive is a very appealing reason to pursue a short sale, it doesn’t compare to the huge benefits of avoiding the foreclosure process.
Here are some of the reasons why a short sale is a far better route for financial stability:
A short sale only lower your credit scores by as little as 50 points, as opposed to the 250 to 300 point drop from a foreclosure.
A short sale is not reported on your credit history. Foreclosure IS reported for at least 10 years.
Current and future employers actively check the credit of their employees, and a short sale will keep that credit check clean and free of foreclosure and/or bankruptcy reports.
You will be eligible for a Fannie Mae-backed loan just two years after a short sale, as opposed to five years after a foreclosure.
In some traditional short sales, and ALL HAFA short sales, the lender is prohibited from pursuing the homeowner for a deficiency judgment. That is not the case with a foreclosure.
If you ever pursue employment that involves a security clearance, you will not need to worry about a short sale creating a challenge for that clearance, since it will not be reported on your credit.
In a loan with any mortgage company, a standard question asked is “Have you had property foreclosed upon or given title or deed-in-lieu thereof in the last seven years?” Going through a short sale will allow you to answer “no” to this question.
As you can see, a short sale allows you to sidestep many of the damaging effects of foreclosure. For that reason alone, you deserve to find out if a short sale will work for your situation.
Once you add the $3,000 HAFA incentive to pursue this foreclosure alternative, it is hard to ignore the value of pursing a short sale. Not everyone will be eligible for the HAFA program, so you need to find out if you are. Contact a licensed foreclosure prevention specialist in your area to find out what your best possible options area.