James Lyon, 916-521-1214 www.JMLyon.com

How will a Short Sale Affect My Credit Score

In all of the short sale listings that I have taken over the past several years, how will the short sale affect my credit is one of the most common questions asked.

The short answer is that short sale will affect your credit score and in some cases a lot.

Exactly how much a credit score will drop while going through a short sale is tough to say, because it is different for everybody. The average drop is somewhere between 100-200 points, but this depends on where your credit starts. The higher the credit score the bigger the drop, the reason being that a high credit score is a fairly clean score and any blemish will really stand out. If your score is already pretty beat up with other missed payments and collections, you might not see a very dramatic drop because your score cant fall as far.

The length of time it takes to complete a short sale will also affect the negative marks but only to a point. If you are able to get your short sale closed with only a 60 and 90 day late your score will take less of a hit than a short sale that goes on for sic months and see's 3 or 4, 120 day late's. After six months, the continuing 120 day late's have less and less of an impact every month. So a short sale that takes a year wont be that much worse than one that takes nine months.

Once your short sale is closed and you are back on track, your other debts and payment history will become much more important. If you have credit cards and other revolving accounts, get them paid down or off. You will still want to use credit on a regular basis so you can work on getting your score up. If you come out of a short sale with no credit, go get some. Start with a secured credit card for $500, use it to pay bills and then pay it off, but you have to use credit to build credit.

The length of time you must wait before being approved for a new mortgage varies on the type of loan you are seeking. Don't quote me on these because I am not a mortgage broker, I just play one on Active Rain!

After a Short Sale;

20% down, where the short sale was caused by special circumstances, 12 months

20% down with no special circumstances, 24 months

FHA products, 36 months

After a Foreclosure or Deed-in-lou, 36-60 months depending on type of loan and lender.

I remember my parents telling me not to run from my problems. The same goes with financial hardship and credit issues, they don't go away, they only get worse.

If you would like some help or a short sale consultation, CONTACT ME here.

How will a Short Sale Affect My Credit Score

The importance of a solid back up offer

One of our goals as real estate agents is securing a really solid, well qualified buyer for our listings. We ensure the buyers ability to purchase by following up on their offer documentation. We check on down payment funds, we call the lender to see how solid the buyers are, we communicate with the other agent to make sure they have their head in the game. We do all this so that when we accept an offer and move forward with the deal in hopes that we wont need to re-market the property, which means more time and lost money for our sellers.

"The best laid plans of mice and men, often go awry." No matter how well we pre-qualify a buyer, there are a myriad of reasons that they will not turn out as solid as we had hoped. Enter the back up offer!

A back-up offer is simply an offer that wasn't as strong or was received latter than the top offer. When our top offer falls out for one reason or another the first thing agents do is to start calling back up offers. On many listings once an agent has an offer they run with it and either don't except back ups or don't keep track of them.

Having a great back up offer on a short sale is especially important. Due to the time involved and in some cases the unpredictable responses of some lenders, it is impossible to tell what buyer will end up buying the house at the end of the day. Many of my short sale listings have been sold to the first buyer and many have seen three or more buyers.

As an agent taking listings, one of the first things I explain (especially for short sales) is The importance of a solid back up offer. I explain that we will market the property for at least two solid offers, I do not stop with the first offer. I also explain to the first, or highest and best offer, that their offer will be signed but that we will continue to market the property for sufficient back up offers.

Just this week, a solid back up offer saved the day. We received short sale approval on a great Roseville CA home in the Kentfield neighborhood just last week. On Tuesday, for some mysterious reasons the buyers had to back out of the deal. Which is a tough thing to tell the sellers, a short sale is an emotional roller coaster as it is without loosing buyers. But in the same sentence, I was able to tell them that the back up offer we secured was very excited about buying their home!

We have spent the last two days putting the new buyers in place and are now in escrow with them, and everyone is very excited. Dont let the second or third offer disappear, keep track of them, keep them in the loop, give them updates just as you do the first position buyers, you never know who will be there in the end.

The importance of a solid back up offer

Sacramento Property Auctions

Some of the best deals on real estate in Sacramento is on these homes that never hit the mls. These are the trustee auctions, properties that are seeing the auction block for the first time. They have not been on the mls and they are not bank owned (REO) property.

There is a fair amount of competition for these properties, but not compared to properties listed on the mls. In these auction you are competing against a room full of people and the people they represent. With properties on the mls you are competing against everybody else.

You still have to do your homework. You need to know the values of the property your bidding on. You need to know the general condition, you should have general knowledge about the cost of rehab and resale, whether on not the property is occupied and if it is, how to deal with the occupant.

I have been attending Sacramento Property Auctions for a long time. I actually went to my first auction looking to buy my personal residence and I really enjoy the process of buying a home on the spot, for all cash. Oh yes, these purchases need to be all cash, cash in hand at the auction, no exceptions. You can not even go back to your car, they want a check and they want it right away!

The last auction I attended with a client saw a successful bid on a great condo on the river in Rancho Cordova. The comps on the property were at $142,000. The property was purchased for $84,000. There was a tenant in place with rents at $1550. Not a bad ROI, cash on cash or any other way you want to calculate the return on that purchase.

If you have been wanting to get into property auctions for capital appreciation or for fixed income, give me a call!

You can also contact me and put in the message that your interested in Sacramento Property Auctions.

Sacramento Property Auctions

Roseville Relocation Kit

Are you moving into the Roseville California area? Roseville is an established suburb of California's capital city of Sacramento. With a population over 100,000, Roseville has some of the finest homes, shopping and dinning in the area. A thriving and continually developing business corridor has continued to propel Roseville forward even if challenging economic conditions.

Information about housing, employment, schools, demographics and more is available to you at no cost.

For a free Relocation Kit, Click here and put Roseville Relocation Kit in the message section.

How long does it take to sell my Sacramento home?

If you are considering selling your home in the Sacramento area the following two charts will help you to understand the length of time it takes to sell your home.

The is a huge difference between selling a home with equity and selling it as a short sale. Not just in the credit hit, amount of paperwork and difficulty scale, but in the time it takes.

The following chart is the amount of days on average that a home is on the market as a traditional sale, (one with equity in it);

You can see that the average time on the market is around 60 days. This chart also tells you that the selling price is 94% of the listing price. This means that the home sold for 6% less than where the home was listed. (That 6% is off the list price when the home was sold, not the original list price. This does not take into account price reductions.)

This graph shows average time on market for short sales;

As you can see, the time on market for short sales is 2.5 times as long compared to traditional sales. This speaks to the difficulty of short sales and the process involved. Needless to say, if you are considering a short sale you want to work with someone that has a good track record of getting the approved and in a timely manner. Also note that the selling price to listing price percentage is about the same as on the traditional sales, 94%. This does not tell us whether short sales are selling at a discount to their traditional counterparts, but it does tell us that the list/offer mindset is the same regardless of type of listing.

If you have any questions about time on market or the selling process, Contact Me here.

If you would like a free professional evaluation of your situation or home, Contact Me here.

Thanks for reading, How long does it take to sell my Sacramento home?