My house is currently in foreclosure, NOD dated 10/09/12, no Trustee Sale Date yet. Real estate agent offered to short sale my house and indicated that shortsale does not have the same impact on my fico score versus foreclosure. I have BK7 discharged in 2010. What is my best foreclosure option? Deed in Lieu? Short Sale? Or let foreclosure process go through, walk away after Trustee Sale? Fico score already got hit after BK7 in 2010, will my fico score get hit again after shortsale or foreclosure? If I do a short sale or Deed In Lieu, should I have a Real Estate Lawyer review the contract to make sure that I don't incur hidden liabilities in the contract?
I am confused which way to go (shortsale vs deed in lieu vs foreclosure) and would highly appreciate your advice on this. Thanks.
David gave an excellent answer. In CA, short sales can actually afford you more deficiency protection than a foreclosure. I have yet to see a bank take a deed in lieu so unless that's actually been offered, don't bother exploring that alternative.
As far as taxes, the results are the same regardless of the path you take.
With respect to your credit, FICO actually records short sales and foreclosures exactly the same ("not paid as agreed"). The big difference in credit scores is actually in the amount of missed payments along the way.
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Based upon the information you have provided: Your credit is already bad. With Mortgage Tax Relief Act being extended you already know that there are not going to be tax consequences. With CA being Nonrecourse you are not going to be sought for any deficiency. It really does not matter which of your three options you choose.
You should consult with a Real Estate attorney or Tax attorney to review the entirety of your situation to make sure that there is not something you are missing.
Mr. Weisen stated that your loan is a no-recourse loan, that is assuming the lender completes a trustee's sale, better known as the anti-deficiency law. You need to check the following with a California attorney, but in Arizona the anti-deficiency law is limited to only trustee sales or judicial foreclosures. That means if someone does a short sale or other workout the anti-deficiency laws do not apply. At that point you are left with the contract language in the short sale or workout agreement. Hire a good foreclosure attorney to determine your exposure.
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You definitely will want to consult with an attorney before agreeing to a short sale or deed in lieu. An attorney will not only be able to discuss with you the best option, but can also negotiate the terms of any agreement.
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