I live in a neighborhood that is turning bad very fast. I need to get out. However, I owe $109,000 and I can probably only get $90-95,000 for the home. It's so bad right now that I am willing to just walk away from it. I make decent money so is a short sale out of the question? My realtor recommended a deed in lieu of foreclosure. I don't want to mess up my credit though. Should I tap my 401k to cover the potential loss on my home? Take out a loan to cover the loss? Or worst case scenario foreclose even though I have no financial hardships? I am in dire straits. Please help!!
2007-07-10 15:56:00 · 4 answers · asked by Dnice 2 in Business & Finance ➔ Renting & Real Estate
A Deed-in-Lieu for a foreclosure hits your credit the SAME as a foreclosure. This is a huge misconception in the industry, and most of the people spreading this myth are Realtors that don't understand how it works.
A short-sale is a little different, in that it is an agreement between you and the loss litigation department. They may or may not report it to your credit as a short-sale.
The "giveaway" on a credit report of a short-sale is a final payoff on a closed mortgage account, that is significantly less than the high-credit limit, and alot of lates right before the payoff...and the mortgage has been opened a short length of time, to where a legit payment is unlikely. The underwriter will call the mortgage company and get the details, and that is when they find out it's a short-sale, and for underwriting purposes...lenders treat these the same as a foreclosure when they are discovered.
The advantage of a Deed-in-Lieu, is that you avoid foreclosure fees and the deficiency judgement, but insist on getting it in writing...but again, they have to approve it.
Have you researched to find out what happened in your neighborhood?
2007-07-10 16:10:08 · answer #1 · answered by Expert8675309 7 · 0⤊ 0⤋
The other problem with the short sale (aside from hurting your credit) is that you will probably be taxed on the difference between what you owe and what you actually pay. If it's a difference of $20,000 the IRS treats that as income and you'll probably be taxed on that next year.
I'd take out a loan or do whatever you can to avoid it. A foreclosure will prevent you from buying anything for many years to come, and a short sale isn't much better.
2007-07-10 16:44:13 · answer #2 · answered by operababe_61 3 · 1⤊ 0⤋
You will have repercussions from either a short sale or a foreclosure. If your desire is to maintain your credit score as it now is, sell for as much as you can get and prepare to pay the deficiency at the time of the sale.
Anything less than that will do nasty things to your credit file.
2007-07-10 16:10:40 · answer #3 · answered by acermill 7 · 0⤊ 0⤋
From my experience doing Short Sales, you do need some financial hardship to show to the bank. If you don't want to mess up you credit, try to talk to the bank and see if they can change your loan parameters. Adjust your rate, extend the term, or defer interest. You can always list it for sale and see what you would have to come out of pocket. Or try and stick it out. Good Luck
http://www.insider-reports.com
2007-07-10 16:14:01 · answer #4 · answered by Anonymous · 0⤊ 0⤋