Short Sale vs. Foreclosure

With one in five active Pierce County listings a short sale there are a tremendous amount of people either actively engaged in a short sale or, at least, thinking about one. Ever wonder how a short sale differs from a foreclosure? Here's how each can affect a seller's credit, among other things. Sourced from the Distressed Property Institute, LLC.

Credit Score
Short Sale: Only late payments will show and after sale mortgage will be reported as paid or negotiated. This will lower the score as little as 50 points, if all other payments are being made. A short sale's affect can be as brief as 12-18 months.
Foreclosure: Score may be lowered anywhere from 250 to over 300 points. Typically will affect score for over 3 years.

Credit History
Short Sale: A short sale is not reported on a credit history.
Foreclosure: Will remain as a public record on a person's credit history for 10 years or more.

Security Clearances
Short Sale: Does not challenge most security clearances.
Foreclosure: Foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony. If a homeowner has a foreclosure and is in a position that requires a security clearance in almost all cases clearance will be revoked and position will be terminated.

Current Employment
Short Sale: A short sale is not reported on a credit report and is therefore not a challenge to employment.
Foreclosure: Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure in many cases is ground for immediate reassignment or termination.

Future Employment
Short Sale: A short sale is not reported on a credit report and is therefore not a challenge to employment.
Foreclosure: Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have.

Future Fannie Mae Backed Loan
Short Sale: Eligible 2 years after short sale.
Foreclosure: Ineligible for at least 5 years.

Now for the obligatory disclaimer: Neither I (Cathy Hodges) or The Distressed Property Institute assumes responsibility nor guarantees the accuracy of the above information and are not engaged in the practice of law or give legal advice. But do feel free to give me a call if you have any questions about this. I can answer some questions and let you know when it's time to speak with an attorney.

WaMu Goes to Washington

http://www.latimes.com/business/la-fi-wamu-inquiry13-2010apr13,0,324316.story

The US Senate is finally exposing what everyone in the real estate industry already knew.

It's easy to pin this all on the mortgage lenders, but I think everyone (lenders, buyers, real estate agents) all need to take some responsibility for this.

You Heard It Here First

The headline in today's News Tribune is about the surge in Pierce County home sales. Click here for article. If you have been reading my blog (all 5 of you, ha ha) then this headline comes as no surprise. My March 1 blog was all about the spike in the number of homes that have gone pending. Yesterday I ran the numbers for pendings over the last 30 days and I would fully expect strong home sales in April too. In fact, the $250,000 and under market is very competitive now.

Curious to see what happens when the tax credits expire...