- Personal Finance»
- Mortgages & Loans
Foreclosure or Short Sale
Which option is better for me?
Which Options better for me?
Ok, you've now reached the point where you're considering giving the keys to your bank and walking from this financial nightmare. Your upside down and it looks grim; "Go ahead and take my home, I'm not afraid of a foreclosure...see what I care!! I'll just walk and start over".
No doubt you will start over. But let's make sure you consider the time line each option will require before qualifying for another mortgage. Of the two options, one will prolong your problem and one will shorten it.
Making the wrong move
At this point, you might be saying that it doesn't really matter what I do because I've run out of options. My back is up against the wall with bills. My phone rings off the wall, I'm getting threatening letter and I just want this to be over. Well, no doubt you're in a bad situation but some good advice will make a world of difference in your recovery strategy. In the words spoken by King Solomon, made famous by Abraham Lincoln in 1859; "This too shall pass". However, making the correct move is critical in determining how FAST this will pass!
No matter if you go the foreclosure route or short sale, you'll need to wait 4 years before qualifying for a conventional mortgage and 3 years for a government loan. While Real Estate Solutions, LTD is happy to provide a rental property for you (In Illinois, we operate in DuPage, Kendall, Will and Kane counties), there's a catch in determining when time lines begin.
For example, let's say your decided to allow the bank to take your property. The average foreclosure processing period in Illinois is 300 days. Let's say the foreclosure process starts on August 31st, 2009, putting the eviction date at approximately June 30th, 2010. But the clock's still not ticking because its 3-4 years from the time the bank SELLS your property.
Hypothetically, in July of 2010 the bank lists your property. What if it just sit because of the current glut of homes? And what if your property needs lots of work? That might add the market time. If you've missed spring market, the peak selling time of the year, it'll take longer for the bank to sell. Another consideration is the wave of mortgagesscheduled to reset between 2010-2012. These mortgage resets will adjust at the rate of $20-$35 Billion per month during this peak of the sub prime mess, resulting in another flood of foreclosed properties that could further delay the selling of your former property. Make sure to check out the Real Estate Solutions, LTD website for a graph of these trends.
When your home finally sells, that's when you're 3-4 year process begins. So if your home sold in spring market of 2011, your now at 2014 on a government loan and 2015 for conventional. Yikes, that's 5-6 years from right now? That makes no sense to me.
Short Sales with Real Estate Solutions, LTD.
The proactive method to deal with your problem is a short sale. A short sale is when you agree to sell your property for less than what is owed to the banks in a mortgage. Naturally, the bank has to agree to the price. But why is this a better way than a foreclosure?
Here's why. You know your not able to stay in the property because you can't afford it, regardless of whether your upside down or not. In fact, today a whopping 21% of homeowners owe more on their home than their home is worth. This is called underwater or up-side-down. This number is expected to grow to 48% of all American homeowners by 2011, according to a recent story published from Rueters. Lets say we agree to help you process a short sale and begin working together on August 30th, 2009. We handle the necessary paperwork and help guide you through the process. Some banks are quick to process a short sale, some take forever. It really depends on how well the bank is staffed and what bank you're dealing with.
Additionally, the Bank wants to compare offers on a short sale to what they think they'll get at a sheriff's sale. Because the cost to a bank to process a foreclosure is about $60,000 per property, a short sale can be a better option once all these factors are considered against the office we make to the bank.
Please note, if you have a mortgage with Countrywide and are reading this blog, I'd like you to call us immediately at 1-877-420-1166. We have a unique option to offer you.
Let's say it takes a year for the bank to approve the short and the property closes on August 30th of 2010. Now, your at 2013 on a government loan and 2014 on a conventional and this is factoring an entire YEAR to process the short! That's only 4 years from now and you've cut an entire year off the process of qualifying for a mortgage.
So call us at 1-877-420-1144 and let's talk about solving your problem and getting your timeline started. Call Real Estate Solutions, Ltd.