Last week we met with a Short Sale Managers at Wells Fargo when she told us about 100 or distressed properties that are pending foreclosures after the discharge of Bankruptcy! How could these home owners avoid foreclosure damage compounding the hit by their bankruptcy? One option still on the table is still a Short Sale.
Our research indicates that there might about 94 such properties in Santa Clara County where the home are in pre-foreclosure state while the owners have filed for bankruptcy. In these cases the bankruptcy results in a temporary delay in the foreclosure process and once the bankruptcy is discharged the bank will proceed with the foreclosure.
What’s unique about the Short Sale option here is that it prevents further damage to your credit that will be marked with a Bankruptcy for more than 7 years. One of the benefits of the Short Sale are than the home loan is reported to the credit agencies as “Paid/Satisfied” which minimizes any damage to the owners credit score. In addition, most lenders now offer Relocation Expenses as part of the Short Sale negotiations to motivate the owner to vacate their property where they have stopped making payments. In fact, last week Wells Fargo jumped into the mix with Relocation Incentive for their World Savings and Wachovia Loans that are under water with relocation funds of 15,000!
In the past we have criticized the banks for their insane moves, but this can NOT be considered one of them since some Los gatos home owners who have been living without making any payment had no reason to move. Now with the threat of looming foreclosure, these incentives are very timely, specially since the tax forgiveness of these relocation funds might not be available in 2014. Another feature of Short Sale is that in most cases there is No Cost to the Seller for the Short Sale and majority of the costs are covered by the lenders.
Foreclosure on the other hand, is a legal process where the lender acquires the title of the property from an owner who has stopped making payments on the loan. But the implication of a Foreclosure are severe drop in the owners credit score and substantial loss in their ability to borrow money in the future. In fact, results of the Foreclosures appear on the owners credits history for up to 7 long years!
Feel free to contact us about your options after your bankruptcy is discharged since your bank is still willing to avoid foreclosure which might be the best option for you.