Oklahoma City Short Sale Series-Part One

Part One-What is a short sale and why do one?

Let me first state that Oklahoma City compared to the rest of the nation is doing great. This does not mean that evertything is perfect here in the Heartland. The last seven years has seen easy money, low qualifying credit scores, and the overall national meltdown has not left us unaffected. We have foreclosures and we have short sales. For many this is a devasting loss, but for others, they seem to be unaffected about losing a home. Our team does not care about whether you care or not becasue someday you will care, especially when you try to get any kind of loan. We will attempt to answer all your questions in this series. The first three will be about sellers, the next three will be for buyers, and the last will be for tieing all the lose ends together.

Why should you consider a short sale? I guess we should start off talking about what a short sale is. A short sale is when a lender or lenders decides to take a loss up front versus a larger loss later. Typically the loss is double for a foreclosure so a short sale can be a win for the owner, and a win for the lender. You first have to establish a hardship, then you have to be transparent about your finances, and as we will wstablish later, you need a Realtor who is a professional at short sales, not someone doing on the job training. Let's go onto why you should do it.

First is taxes. If you are an owner-occupant who decides on a short sale, the IRS will not consider foregiveness of debt as income through 2010. In foreclosure this is not so. Ask yourself, would you want to have to pay taxes on money you never made? The IRS gets theri way.

The second is future loans. In a forclosure an owner-occupant can't get a Fannie Mae loan for 5 years, and an investor for 7 years. In a short sale that period for both is reduced to 2 years.

Third is your credit score. A foreclosure is a minimum of a 250 point hit to well over 300, and has a three year period it strongly affects you. On a short sale only your late payments will affect your score and the credit hit can be a low as 50 points.

Fourth is the length of credit history. A foreclosure is reflected for 10 years, but a short sale is not shown on your creidt report. it will be be paid in full, settled or paid as negotiated.

Fifth is security clearances. You can lose a security clearance with a foreclosure. If you are a policeman, in the CIA, or the military a foreclosure can get you thrown out, and we have had clients in this position. A short sale will not affect a security clearance.

Sixth, employers have the right to check your credit. Think about it, you work with money as a cashier, an accountant, or with a mortage company, your employer has the right to terminate you, and often your emplyment contract with places like Wal-Mart will have that.

Seventh, you can get a deficiency judgement. In Oklahoma we are a deficinecy state. That means that a mortgage company can get a judgement against you and have your wages garnished. In a short sale, a deficiency properly negotiated is gone.

Eighth, in a short sale you bring a zero balance to closing. Once it is all said and done you have no money out and no past history to worry about. In fact, FHAhas a program that can pay for moving expenses.

In the next part we will deal with how do you qualify for a short sale, and what do you need to do to get it.