Effects of Foreclosure vs Short Sale in Virginia Beach

July 3, 2010 - PRLog -- EFFECTS OF FORECLOSURE VS SHORT SALE IN VIRGINIA BEACH

In evaluating whether or not to avoid foreclosure by pursuing a short sale, it would be useful to know what some of the differences are in the effects on "life after the event".
Please do not view the following to be legal or financial advice – it is best to consult your own attorney or tax accountant for that -- but it's a compilation of some data I've gathered.
And, to be honest, there is some debate about some points below -- so you may very well find someone else has a different opinion or set of data.

Credit Score - let's tackle one of the biggies right off the bat.  How bad is a Foreclosure? And, isn't a short sale going to have the same effect? ...Answer: 1) BAAAAD. 2)Nope.
A foreclosure can lower your credit score as much as 250-300 points and will affect your credit score for 3 years or more.
On the other hand, a short sale typically gets reported as "settled" or "paid as agreed" or "paid as negotiated" -- MUCH better than your report showing "Foreclosure". This can lower your score as little as 50 points. So, the effect can be overcome in as little as 1 year.

Credit History - going hand in hand with the score...
A Foreclosure will remain on your record for 7 years or more.  So, for the next 7 years, any time a creditor or employer or anybody looks at your Credit Report, your foreclosure will show up.
As mentioned above, though, a Short Sale doesn't actually get reported on your credit history because there is no specific reporting item for "short sale". Instead, it shows as "paid as agreed/negotiated" or "settled".

Deficiency Judgment - here in Virginia, the bank(s) have the right to pursue a deficiency judgment in 100% of foreclosures.
However, in many successful short sales, it is possible to negotiate with the lien holder to waive their right to pursue a deficiency judgment.

Deficiency Judgment Amount - some recent data puts bank losses from foreclosure at 30-60% of the loan amount. The process of foreclosure, being an REO property, and terms of sale means that the property usually commands a lower sales price and has cost the bank time and money - often resulting in a higher deficiency amount.
Conversely, the reason bank(s) agree to a short sale is precisely Because they anticipate a much lower deficiency amount.

Since the Virginia Beach and Norfolk area is a transient place and is home to a lot of people with security clearances, I’ll address that and employment.

As anyone with security clearance knows, a foreclosure is a serious black mark that can cause your clearance to be automatically revoked. Unfortunately, this can also result in termination or reassignment if that security clearance is an integral part of the job.  In contrast, since a short sale is not explicitly reported on your credit report, by itself the short sale does not endanger most security clearances.

With regards to employment, many employers now check the credit report of all new potential employees and some also check it for current employees - especially if the position is a sensitive one.  Again, because the short sale is not explicitly reported, it usually does not present any difficulties for present nor future employment.  But, the reporting of a foreclosure results in a black mark on your credit history that may result in termination or reassignment from present employment and may jeopardize future employment opportunities as well.

The author, Dave Greig, is a professional real estate agent and real estate investor who specializes in helping people stop foreclosure via short sale. You can get more information at http://www.StopForeclosureWithDave.com and also at http://www.EstelProperties.com .
There is a Free Report at http://www.StopForeclosureWithDave.com that explains the Fastest Ways to Avoid Foreclosure.