Heading toward a short sale?

Short sales were all the rage for a while. With an improving economy, they have declined. If you find yourself in this predicament today, make sure you are thinking of your future. There IS life after a short sale/foreclosure.

When a short sale in lieu of property foreclosure is initiated, the impact on a credit profile can be damaging. If some specific defining verbiage can be included in the submission of the short sale contract to the bank representative on the front end, or in the beginning of the transaction, it will lessen the derogatory impact of the short sale contract and execution. There will be the late payment(s) matter to address on the credit report, but that is a much easier fight compared to the settlement deficiency normally reflected. Remember, everything is negotiable.

What does this mean? As part of the negotiation process you can ask (personally I would demand) that they only report this event to the credit bureaus as "account closed, paid in full, -0- balance". This mitigates your responsibility as far as future companies that may take over the deficiency debt. It is also important as far as new lenders are concerned that may be reviewing your reports..  And as stated above, the late pays leading up to the short sale are still there, but getting them removed is pretty routine.

Secondly, if additional phrasing can be inserted in the short sale agreement, again, from the beginning of the procedure, it will mitigate the opportunity for a deficiency judgment to be sited against the mortgage holder in the future. There will be zero opportunity for the lien holder to pursue legal action (deficiency judgment) for the deficit between the actual amount due on the property and the agreed upon short sale total. Bottom line, many lenders wait six months or so and then sue you for the deficiency and there isn't a lot you can do about it unless you require they not have that option in the future.