foreclosure will have a definite and long-lasting negative affect on your credit score. While both a Short Sale and a Foreclosure will have a negative impact on your credit score, a foreclosure is much worse. If the bank finalizes that foreclosure, you may be hurt for 10 years. If you opt for a short sale, remember that this is considered a debt forgiveness by your bank. As such your negative impact is around 2 years of negative scores.
At Victor Bao PA, we negotiate with the bank to try to reduce what you owe your bank so that you dont have a deficiency judgment. Why reduce the debt? For two reasons. First, in a full foreclosure without negotiating a short sale, you will be on the hook for the difference between your debt and what the bank got in an auction for the sale of your home. Yes, if you owe $100,000 and the bank forecloses on you and that foreclosure sale brought the bank $80,000, you are still on the hook for $20,000.
If on the other hand we work a negotiation for a short sale, there may not be a deficiency judgment. Don’t forget that if you owe $100,000 and you don’t negotiate a reduction of debt as part of your short sale, then even though the bank has forgiven your debt, more than likely, you will pay taxes on the debt forgiveness. Yes, you will pay taxes on the amount you owe minus the amount the bank recovered from the foreclosure sale.
We negotiate a reduction in debt, move out costs, and for the bank to pay for the entire short sale process for those buyers we believe will qualify for the short sale program.
The key at this point is to reduce the impact of negative credit scores and certainly to not have a full foreclosure on your credit report so you can hold a job that does a background check where credit is part of their efforts. A full foreclosure will also affect your ability to rent, lease a car, get a credit card, or buy a new home in 10 years time. That’s a lot of time.
Call us at (786) 546-2778.