Naperville Short Sale Agents: October 2014

Thursday, October 30, 2014

What’s the Difference Between Naperville Short Sales and Foreclosure?

When a homeowner fails to make his or her mortgage payments or becomes delinquent in their payments, the home is foreclosed upon. In a foreclosure, the lender assumes ownership of the home and evicts the delinquent borrower. The lender initiates the sale of the home at a foreclosure auction or a trustee sale.

Differences between a Naperville short sale and a foreclosure

A short sale is used by distressed homeowners as an alternative to foreclosure. If a homeowner owes more than the current market value of the home, a good option is to do a Naperville short sale. A short sale is initiated by the homeowner, unlike a foreclosure where the home is sold by the lender. In a short sale, the home is sold through a real estate agent specializing in short sales and is sold much like a traditional sale, except short sales involve more paperwork and parties than a traditional real estate transaction. As with any transaction, there are tax implications, please read the rules on www.irs.gov and speak with your lawyer before proceeding.

If the lender approves the short sale, the lender agrees to accept less than what is owed from the proceeds of the sale. In most circumstances, the borrower can walk away debt free — if the lender agrees to waive the difference of the loan balance and the proceeds from the short sale.

Benefits of a Naperville Short Sale Over a Foreclosure

Impact on Credit Score. – Short sales and foreclosures both have a negative impact on the borrower’s credit score. However, short sales have a comparatively lesser impact on the credit score. A borrower’s credit score may drop from 50-150 points during a short sale and 200-400 points after foreclosure.
Waiting Period to Buy a New Home – Borrowers have to wait 7 years after foreclosure before they can buy a new property. In a short sale, the borrower may be able to buy a new house at least a year after the short sale depending on the type of loan, the borrower’s eligibility and their unique situation.
Mention in Future Loan Applications – It is mandatory for a foreclosure to be reported in future loan applications, which could have a negative impact to your loan application. A short sale does not necessarily have to be mentioned in future loan applications, which is more beneficial to borrowers who plan on buying a new property after a short sale.
HAFA Eligibility – Homeowners who have gone through a short sale can still be eligible for the Home Affordable Foreclosure Alternatives (HAFA) Program, while those who have gone through foreclosures are not eligible for the HAFA program.

Although a short sale and a foreclosure both have a negative impact on one’s credit score, a short sale is still a better option than foreclosure. Short sales offer more advantages for distressed homeowners and help them recover their financial standing faster. If you want to know about Naperville short sales, visit www.RyanHillCanHelp.com.

If you are ready to do a Naperville short sale call me, TeresaRyan at 630-276-7575. As an owner/broker of Ryan Hill Realty, I have the experience and tools to help you sell your Naperville short sale home.

Teresa Ryan

Broker/Owner, CDPE

Ryan Hill Realty

1288 Rickert Dr Suite 300, Naperville, IL 60540

630-276-7575

TRyan@RyanHillRealty.com

Wednesday, October 29, 2014

How Does a Naperville Short Sale Affect the Seller’s Credit Score?

How much impact does a Naperville short sale have on a seller’s credit score?

The effect of a short sale on your credit score

When you pay less than what is due on any debt, it stands to reason that your credit score will take a hit, especially when it comes to a mortgage. Both, a short sale and a foreclosure will negatively impact your credit score.

The term ‘short sale’ doesn't actually appear on your credit report. It will, instead, appear as a mortgage that was ‘settled’ for less than the full balance. Settled accounts, especially when it comes to a mortgage, are very negative.

Any delinquent payments leading up to a short sale will remain on your credit report for seven years from the original date you let your mortgage go delinquent. If you were consistently on time with your payments, the mortgage will remain on your credit report for 7 years from the date it was reported or paid.

I strongly recommend that you find out and understand exactly how your lender will report your short sale, foreclosure or deed in lieu of foreclosure to the credit reporting agencies and if they will sell the remaining debt to a collection reporting agency.

The impact on your credit score will depend on how your mortgage was closed and reported on your credit history, and your FICO score prior to the short sale (or the starting score). The higher the starting score, the longer it will take for it to fully recover.

Let’s say you have a good starting credit score of 780, it will take your FICO score around 7 years to fully recover. This is true for both short sales and foreclosures. However, if the starting FICO score was lower, the short sale seller’s score can fully recover in a shorter period of time.

Distressed homeowners with a FICO score around 680 can recover their scores in around 3 years, which is less than half of the amount of waiting time than those who had higher FICO scores prior to the Naperville short sale.

The number of days you were late on your mortgage, or what we call mortgage delinquency, also greatly affects your credit score, dropping by 50-250 points.

Here is a table showing the impact of mortgage delinquency on the credit score. The second table shows the time it takes to fully recover based on the starting FICO score:

If these figures alarm you or make you feel hopeless, don’t be! There is still hope of rebuilding your credit after a Naperville short sale.

Here are some things you can do to rebuild your credit:

Pay all your bills in full and on time. – This includes your credit card bills, utility bills, monthly phone and internet charges, etc. Although they are not required to do so, you can request these companies you make your payments to report to the credit bureaus that you have made your payments in full and on time. They will do it if asked. Credit bureaus give more weight to credit card payments than utility payments but if you are working on rebuilding your credit, nothing is too small or too big. Every single payment you make in full and on time counts.
Don’t close your existing credit card accounts. – Keep your credit cards open as this will lower your debt to credit ratio and improve your credit score as you pay off your balances. Avoid opening a new credit line.
Try applying for a secured credit card. – If your credit card accounts have closed after a Naperville short sale, you can try applying for a secured credit card. This is a good way to rebuild your credit score as well as control your spending since the amount of money you deposit acts as a self-imposed credit limit as well as collateral.

Although a Naperville short sale can greatly affect your credit score, you still have a chance at rebuilding your credit. Use the waiting period wisely, whether 7 years or less, as a time to do these things that will help you improve and rebuild your credit score and save for a new home so you can get another chance at homeownership after a Naperville short sale.

If you are ready to do a Naperville short sale, call me, Teresa Ryan at 630-276-7575. As Broker/Owner of Ryan Hill Realty – www.RyanHillRealty.com, I have the experience and tools to help you sell your Naperville short sale home.

If you have already gone through a short sale, The Federal Housing Administration’s recent Back To Work Program could be the answer if you want to apply for a home loan again in a shorter period of time. Talk to me, Teresa Ryan, or talk to a member of my certified expert team to see if you are eligible, call us today.

Teresa Ryan

Broker/Owner, CDPE

Ryan Hill Realty

1288 Rickert Dr Suite 300, Naperville, IL 60540

630-276-7575

TRyan@RyanHillRealty.com

Thursday, October 2, 2014

Can a Seller Rent Back Their Home After a Naperville IL Short Sale?

In most cases, the short answer is ‘No’. When you start your paperwork with the lender, they will have all parties sign an Addendum stating that the Seller must vacate the property at or prior to the close of escrow. It will also specifically state that the buyer will not enter into a rental agreement with the Seller after escrow closes. An important agreement you will receive is the Arm’s Length Agreement (ALA), please go over this agreement with your lawyer and real estate agent to make sure that you understand all the terms and conditions it contains.

Once a buyer has purchased a home in a Naperville IL short sale, it's his or her right to do with it as he or she pleases. The rights of ownership of a short sale home are the same as they would be after a traditional sale, with a few exceptions.

It is the buyer’s decision to live in the home, resell it, or rent it out to whomever the buyer prefers, including petition the lender to allow them to rent to the former owner. However, the final decision is up to the lender.

If the Buyer and the Seller are not family or related in any way, and wish to pursue this line of action, both parties must disclose their intention to the lender (with the help of lawyers) prior to signing the Addendum or any agreement for that matter, to try and negotiate these terms. A full disclosure to your lender is essential. Failing to do so and renting back to a Seller is considered fraudulent and could rescind the short sale after closing.

If, on the rare occasion, the lender agrees in writing to allow the seller to rent back the house from the buyer, then the new owner needs to make sure that the previous homeowner, and now their tenant, is able to meet the monthly rental amount. Keep in mind that the homeowner defaulted on their monthly payment to the lender to begin with and went into foreclosure.

The best thing to do is for new owners to request for a credit report and verification of the tenant’s income. If the tenant can’t account for his or her money, then the new owners should think twice before signing a lease contract. If the credit report shows that he or she has been in arrears on debts that he or she should have paid.

If the new homeowner is satisfied that the seller is capable of making monthly rental payments, then the benefit of renting a Naperville IL short sale home to the former owner is mutually beneficial. The home will start generating income immediately, and in the long term, the home will appreciate in value.

The best thing to do is to talk to your lender and check the fine print if there is any clause stating that the Naperville IL short sale seller is not allowed to purchase or rent back the home. If you really intend on renting back your short sale home, make sure to formally disclose it to your lender to avoid being accused of fraud and get their approval in writing.

Talk to an experienced Naperville short sale agent or call me, Teresa Ryan at 630-276-7575. As a Broker/Owner of Ryan Hill Realty - www.RyanHillRealty.com, I have the experience and tools to help you sell your Naperville short sale home.

Teresa Ryan

Broker/Owner, CDPE

Ryan Hill Realty

1288 Rickert Dr Suite 300, Naperville, IL 60540

630-276-7575

TRyan@RyanHillRealty.com