Sell Your Home Short Before Volunteering a Strategic Loan Default and Foreclosure

 

Some home and property owners in California are upside down where loan amounts are higher than market value of the property.

People in this situation should be careful and AVOID FORECLOSURE while doing a SHORT SALE of the property. 

Some owners have chosen to voluntarily walk away from their loan obligations on properties that are worth less than what is owed on the loan (mortgage), even though the owner is financially astute and can afford to make payments.

This would be a "STRATEGIC DEFAULT", which has adverse effects on credit history that can prevent you as owner from getting another loan for 7 to 10 years. 

Fannie Mae and Freddie Mac have been strongly against allowing owner/obligor on home loans to strategically default and recover quickly and buy another property. 

California is a "single-action" or "one-action" rule state, which allows the lender either to foreclose on the property or file a civil lawsuit against the owner/obligor for the full loan amount (Lender is not allowed by California law to use both actions).

Strategic defaults on home loans are not illegal, but they are controversial.  This is especially true where the owner makes a voluntary decision to default when he or she can afford the payments.

A foreclosure after default stays on a homeowner's credit history report for 7 years, which is similar to that of 7 to 10 years after bankruptcy filing.  Any home loan default can lower a FICO credit score by 85 to 160 points.  

Before you choose to voluntarily default on your home loan or that on a vacation or investment property ...  we recommend:

 

• Consult with an attorney about the legal ramifications and what you will need to do to repair your credit history after making that choice.  
• Consult with a local REALTOR® and discuss benefits and process of doing a short sale. 

REALTORs® in your area will work hard to sell your property by the SHORT SALE  process.  If the property is sold short, your credit rating would decline.  However, a primary advantage to you of a SHORT SALE is that you wouldn't be walking away (lenders will like that) and could recover quicker and build your credit and buy a home again.

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This is for information only and is not the providing of tax or legal services.  If you have questions about strategic defaults on home loans and rights and responsibilities of owner/obligors on those notes, or about legal aspects of short sales, contact an experienced attorney in your state and area.

Harrison K. Long - Business Solutions and Advisory - REALTOR® and broker associate, Coldwell Banker Residential Brokerage - 949-854-7747 (phone) - ExploreProperties@gmail.com (email) - CA DRE 01410855 - www.LiveAtNewportBeach.com  -  www.OCPropertyNews.com  -  www.CostaMesaLive.com  -  www.Irvine-homevalues.com  - www.NewportCoastLive.com   - www.CoastLivinghomes.com  - www.OCHomeValueGuide.com -  www.LiveAtIrvine.com  - www.ExploreOCHomes.com  -  www.LiveAtOrangeCounty.com  

"Helping People, Moving Forward, Developing Relationships and Protecting Property Values"  -  We list and sell Orange County, California, homes and properties.  We are short sale foreclosure resource certified by the National Association of REALTORs®.  Thanks for contacting us.

Posted via email from Explore OC Homes