Selling Your Home and Foreclosure

hollyReal Estate: Selling a Home 3 Comments

If you are in the position of needing to sell your home or other Smith Mountain Lake real estate, or if you are dealing with possible foreclosure, the article below by Tim and Julie Harris at Real Estate Coaching, may offer some much-needed information. Some of the lingoes may not be familiar to you, in which case you can contact the professionals at the end of the article for further help or explanation.

Selling Your Home and Foreclosure

How is the Seller’s Credit Effected By a Shortsale?

Sellers will take as big a hit on their credit by going through foreclosure as giving the lender a deed-in-lieu of foreclosure. Points lost on a FICO score are as follows:

Foreclosure or Deed-in-Lieu of Foreclosure
Both of these solutions affect credit the same. Sellers will take a hit of 200 to 300 points, depending on the overall condition of credit. This means if a seller’s FICO score before foreclosure was 680, it could dip as low as 380.

Short Sale
The effect of a short sale on a seller’s credit report is identical to that of a foreclosure. The ding on credit will show up as a pre-foreclosure in redemption status. Which will result in a loss of 200 to 300 points. This means a short sale with a previous FICO of 720 will see it fall from 520 to 420.

The effect on a consumer’s credit report—foreclosure vs. short sale—is the difference between being hit by a train or a bus.

Here’s why:

Waiting Period Before Buying Another Home

Selling Your Home and Foreclosure

Foreclosure or Deed-in-Lieu of Foreclosure
A seller who wants to buy another home after foreclosure will end up waiting about 36 months before a lender will offer any kind of interest rate that makes sense.

Short sale
A notation on a consumer’s credit profile of ‘settled for less than owed’ (short sale) precludes the consumer from obtaining an institutional loan for 24 months, depending on the lender’s program and regardless of FICO score. Fannie Mae guidelines require 24 months of seasoning, and there’s no way to get around this.

Short Sale/Foreclosure Deficiency Judgments

The bad news is a seller could be subject to a deficiency judgment for the difference between the loan amount and the amount paid. In California, purchase money loans are not subject to deficiency judgments; however, hard money loans, equity loans, and refinances are. Some other states have laws regarding personal guarantees, which could also result in a deficiency judgment if the homeowner is held personally liable for loan repayment.

The lender has sole discretion whether to pursue a deficiency judgment in those instances when the judgment is permitted. To determine whether a pending foreclosure or short sale is subject to a deficiency judgment, talk to a real estate lawyer.

If you need more info. about real estate at Smith Mountain Lake, you can contact the team at Smith Mountain Homes Toll-Free at (877) SML-HOME, or visit the website at

Selling Your Home and Foreclosure

Article By: Tim and Julie Harris. Tim Harris and Julie Harris are the founders of Harris Real Estate University.  The nation’s largest online University for Realtors and real estate investors. Named NAR”s Agents of the Year during their first year in the business.

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Comments 3

  1. I’m glad to see that the points taken off are the same in this article for both foreclosures and short sales. I’ve seen some articles that say one is less than the other, but from the grapevine, it sounds like it isn’t so.

  2. Hi,
    Thanks for publishing this.
    We wrote this a few months ago. There have been several changes that make doing a short sale even more beneficial for the homeowner. For example, 2 years after a short sale a person can obtain another FHA mortgage. AND it going to soon be possible for someone to obtain a FHA backed mortgage within 12 months after a short sale as long as they put 15% down.
    Bottom line, SS is vastly better for the seller, the bank and our country.
    Hope this helps!
    Tim Harris

  3. Post

    Thanks for keeping us updated Tim. The article was helpful as is seen in Susan’s comment above. We need all the help we can get in today’s world.

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