Short Sale In San Diego

Search San Diego County Foreclosures & Short Sales

Why would a San Diego homeowner choose short sale over foreclosure?

I see 2 primary reasons.

The first is that your credit score will not be punished as severely. A foreclosure can be reported as a Foreclosure or Repossession and carries a derogatory payment status of 8 or 9 (M1, R1 and I1 being the best and R9, I9, etc. being the most negative) which is just under a Public Record. There is a misconception that foreclosures are considered Public Records to the scoring system, however, they are not. Although there is a Public Notice Record on file once a foreclosure is filed, but this record is completely different than a credit report public record.

A Foreclosure will remain on a credit report for 7 years from completion date. And the score will drop from 50-250 points. The difference in point loss depends on how many points your client has to lose in the payment history factor of their credit. So if someone has a 750 credit score, and they opt to foreclose, their score could drop up to 250 points. However, if someone has a 500 credit score, they may lose 50 points for the same derogatory.

If a Deficiency Judgment or Tax Lien is filed in connection with a Foreclosure, the credit score can drop an additional 100 points.

The second reason to opt for a San Diego Short Sale is securing the personal release of liability in the short sale agreement letter. California is a non-recourse state. What that means is that on purchase money transactions, the collateral is the property secured by the note and in the event of a default the only recourse they have is to reclaim the collateral. If, however, you have refinanced the original purchase money loan then the lender has full recourse.

Additionally if you ever took out a 2^nd mortgage or a HELOC home equity line of credit there is recourse. After foreclosure you could receive a deficiency judgment whereupon potential collection efforts such as wage garnishment could be put into effect. It might even be years later when you are least expecting it. I’ve heard some homeowner’s state “I’ll just file bankruptcy then” That could be an option however with the tougher bankruptcy laws many are forced into a chapter 13 restructure of debt where payments are required.

I have seen a credit report 5 years later after a client had a foreclosure; a junior lien for $32,000 was on the credit report owed to Wells Fargo. My buyer’s credit score was 690. She had re-established new credit, great job, and a little money saved up. Strong candidate for a new home loan. The only problem was that the credit report showed an outstanding mortgage for $32,000. In order to proceed on her loan I needed something proving the $32,000 lien was paid in full. She called Wells Fargo and said, “I had a foreclosure in 2002. This was paid off in the foreclosure.” Wells Fargo’s response was, “no it’s not we show you owe the balance of $32,000”. That borrower will never be able to purchase another home until that debt is satisfied. I have a strong feeling this will become very prevalent in the next 36 months when those that lost their home to foreclosure would like to become homeowner’s again only to find out they are not eligible because they still have outstanding debts.

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Joy Bender knows the intricacies of the luxury real estate market of San Diego and it’s most premier neighborhoods while offering an unparalleled degree of personalized attention to her discerning clientele. She specializes in highly confidential representation of both buyers and sellers who lead a demanding lifestyle. With her extensive experience in San Diego waterfront estates and luxury properties, Joy offers her clients invaluable market knowledge, superior negotiation, and legendary customer service. Joy has helped over 1,000 clients in the past 12 years with their real estate needs.

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