Too many people struggling to make their mortgage payment are under the impression that the best thing to do is to “walk away” from the home and let the bank foreclose. In my opinion, I can’t think of ANY instance where this is advisable. The negative repercussions of a foreclosure on a person’s record are significant. A foreclosure is reported to and stays on the credit bureau records for at least 7-10 years and is similar to a bankruptcy in the reduction of points. A foreclosure also remains on public records forever. Therefore, a foreclosure can negatively affect an application for a job, loan, and even insurance qualification and rates. In addition, foreclosure can result in placing a person’s security clearance at risk. If your job requires you to maintain a security clearance, (government jobs, military, etc) a foreclosure could possibly be detrimental to your career. When security clearance is damaged a job loss can occur.
My advice would be to never willingly allow your home to be foreclosed upon. Do not walk away! Talk to your bank immediately about all the other options. Also, talk to a Realtor and/or a real estate attorney about putting the home on the market as soon as possible, even if the result is a going to be a short sale.
Here’s why; a short sale is not reported to credit bureaus. Late or missed payments will certainly be reported, but they will not affect your credit scores anywhere near that of a foreclosure. Job applications, insurance and security clearance are not affected by short sales. Did you know that banks will encourage a short sale over a foreclosure as they stand to lose less money? They will often grant an extension of time in order to get the property sold vs. foreclosure.
I have experience and advanced real estate training regarding distressed properties. Contact me if you or someone you know could use my guidance. I’m happy to help.
All my best,
By the way…not this is not what I mean by short sale!