Debi Boucher - "Realtor Showcase" Real Estate Slideshows/ Photographer

FICO score - Foreclosure vs. Shortsale?

We better know the answer to this one!

When the 'short sale' activity began to gear up, the big question I heard over and over was "What's the difference to my credit score with Foreclosure vs. Short Sale?" Most didn't have the answer, but for those who claimed to, what I heard most often was that short sales had less of an impact on credit score than foreclosure did. As REALTORS, I fear we have a liability to our sellers when answering this question, and we'd better have it right.

Before you do anything else - suggest the seller discuss their situation with a real estate attorney an a trusted tax adviser.

According to MyFICO.com, quoted here,

"The common alternatives to foreclosure, such as short sales, and deeds-in-lieu of foreclosure are all "not paid as agreed" accounts, and considered the same by your FICO® score. This is not to say that these may not be better options for you from a financial perspective, just that they will be considered no better or worse for your FICO score.

If you are considering bankruptcy as an alternative to foreclosure, that may have a greater impact to your FICO score. While a foreclosure is a single account that you default on, declaring bankruptcy has the opportunity to affect multiple accounts and therefore has potential to have a greater negative impact on your FICO score."

Both result in a loss of between 200-300 points in the credit score.

OK, then what advantage does the seller gain by going through the process of trying to sell their home as a short sale? Consider the scenario.

1. MANY agents will not show short sale properties due to the brain damage inflicted by the time it takes it get an offer accepted and brought to closing. Whether it's because (I have been reminded), that the seller does not get the required information to the lending institution in a timely manner, or because the lending institution is overwhelmed in terms of manpower to get the job done, in most cases, it is a lengthy and time consuming process.

2. So the seller has decided to move forward with the short sale process, and has efficiently and timely provided the lender with the needed documentation. He/she has staged their home (hopefully!), to present it in it's best possible light.

3. Now, they look forward to the many showings they're expecting, and anticipate that buyer walking through the door. (The buyer pool that is limited due to agent and buyer reluctance to view short sale properties)

4. Their agent is doing all they can, open houses, online advertising, etc. to get the property sold in a neighborhood or town with many other property owners doing all they can to achieve the same end, read: competition.

5. If they're lucky enough to get an offer at all, it is probably going to be a lowball offer. It doesn't seem to matter these days how 'right' a property is priced, not all, but most offers coming in are lowball.

6. Assuming they accept the offer, then begins the process of negotiating with the lender.

7. Then there's the possibility of the seller being subject to a deficiency judgment. (This could happen whichever way the seller decides to go.) This requires discussion with a real estate attorney. State laws vary. Another possibility is the requirement by the lender that the seller sign a note (possibly and hopefully, at 0% interest) for the amount of the loss.

So. Why go through this brain damage? What IS the benefit of a short sale?

The benefit of a short sale is this:

In a short sale, new Fanny Mae guidelines allow for the purchase of a home after 2 years of maintaining good credit, with no additional requirements.

The new Fanny Mae guidelines require 5 years after a foreclosure, and are subject to additional credit and down payment requirements for 5 to 7 years.

Therefore, if it's all about 'saving' the credit score, forget it. If the seller thinks they might like to purchase another home as soon as possible, the short sale is the way to go.

New Fanny Mae Guidelines

Woodland Park REALTOR and resident, Debi Boucher

Woodland Park, Colorado—The City Above The Clouds, is so named because it is said that for approximately 360 days a year, the sun shines (at least part of the day) on our little mountain community! The population within the city of Woodland Park is about 7,000. We’re an easy commute traveling west on Hwy. 24 from Colorado Springs, through the historical Ute Pass, and are nestled at the base of Pikes Peak, the mountain made famous by Katherine Lee Bates’ poem, “America The Beautiful”.

I’ve been a resident in this area since late 1992, and fell in love with it instantly. The beauty surrounding us here cannot be equaled, and for me, much of the appeal is our rich and varied history. I am a director on the board of the Woodland Park Historical Preservation Committee, and I am committed to preserving our local heritage. The following is Part 1 of a series of historical articles I plan to share here, and on Localism.com.

The Indians of Colorado's Ute Pass

Ancestors of the Utes have occupied this area for at least a thousand years. The tribes were scattered over an area comprising about 150,000 square miles.

The name “Ute” means “Land of the Sun” and is the origin of the name of the state of Utah. The Ute Indians are the only Native Americans indigenous to the state of Colorado.

They are believed to be one of the first Native American groups in North America to use horses in great numbers, and they were the last tribe in the west to be confined to reservations.

Among the Ute people, the horse was a man’s most important possession, not only for hunting and raiding, but as a symbol of wealth and success.

The Ute’s experience with European-American settlers , is similar to that of many other Native American groups- competition, confrontation, and eventual coerced relocation to reservations.

The Utes And Their Horses

Original Ute Hunting Grounds

Ute Women

In 1873, a large cession of land transferred the gold-rich San Juan area to white settlers.

Indian agent, Nathaniel C. Meeker, insisted the Utes abandon hunting, and take up farming. The Utes had always been nomadic hunters, never farmers. As farmers, he told them, they would have little need for horses, and no need for their race tracks and trails, which Meeker promptly plowed under. In 1879, a group of Utes finally retaliated against their treatment, resulting in what became known as the “Meeker Massacre."

As a result of this incident, they lost most of their remaining land, and all Utes were confined on reservations by 1882.

By 1886 the reservation consisted of 56 million acres, down from the 156,000 square miles the Utes originally occupied.

The Gold Rush 'Land Grab' The Meeker Massacre

In 1905, the US government allotted new reservations. The land taken from the Utes was opened to white settlement.

Each Ute received an 80-160 acre plot for farming. This allotment reduced Ute land holdings by over 85%.

By 1934, the Ute reservation in Southern Colorado consisted of a strip of arid, desolate land, 15 miles wide, and 110 miles long.

Ute Family

All photos courtesy of the Western History/Genealogy Department, Denver Public Library

Commentary excerpted from an article by Jan Pettit, and from the Southern Ute Indian’s website.

If you would like a DVD presentation of this article, CONTACT ME

I hope you enjoyed this article as much as I’ve enjoyed sharing it

Your comments are welcome!

Woodland Park REALTOR, Debi Boucher

Look for Part 2 of the history of the Woodland Park area, coming soon!

By now, just about everyone agrees that staging a listed home will bring a faster sale and more money to the seller. Yet, I continue to see listing after listing that scream "Stage Me!" It's true that not all Realtors are trained, or have the knack, for Home Staging. I have spoken with many Reators that tell me they are not comfortable with telling their sellers what needs to be done, (i.e. pet odors, general cleanliness, etc.), and they're afraid of compromising their relationship with their sellers by hurting their feelings.

Our goal as agents for the seller, is to help them get their property sold as quickly as possible, and for the most money as possible, right? The answer to this dilemma is to bring in a third party. Consider a Staging Consultation with an ASP Realtor in your area. Whether you pay for this service, (as an investment in your business), or the seller pays for it, in the end, you can bet on a happier seller who will be more likely to remember you, and send those much sought after referrals. While it will vary ASP to ASP, my fee is $250-300 (depending on location), for a 2 1/2 - 3 hour Staging Consultation with the agent and seller.

If you are a seller, ask your agent to help you find an ASP Realtor in your area that will work with you to get your property sold, FAST!

I welcome your questions and comments!

Debi Boucher, Accredited Staging Professional Realtor

Prudential Professional REALTORS

Pikes Peak Region, Woodland Park, Colorado