BiggerPockets

I was wondering if anyone could tell me which process is the most harmful to your credit, Deed in Lieu of Foreclosure or a short sale?

OK, its moved to the Credit forum.

GREAT QUESTION!

A deed in lieu of, short sale & foreclosure all effect your credit in the SAME negative way.

I work a lot with the real estate industry and i cringe when i hear agents tell potential clients that a short sale will have a less impact on their credit than a foreclosure. That is false.

Do they say that on purpose to get the commission? maybe, maybe not. I believe most of them really believe that a short sale effects their credit less than a foreclosure.

Lots of wacky info out there!

Frank

I've been doing short sales for several years and I too was told that a short sale has less impact on the home owner's credit than a foreclosure. I was also told that the former home owner would be a able to get another home loan in a couple of years after a short sale where as it could take 5 to 7 after a foreclosure. I, however, have never actually verified this information with any agency. Thanks for the input.

Fannie Mae Guidelines, June 25 2008 documents the specific guidelines. Of the three being discuessed:

Foreclosure: 5 years
Deed in Lieu: 4 years
Short Sale ("preforeclosure sale"): 2 years

Now, its certainly possible there are more recent changes that override these. But that sort of thing does tend to pop up here, and I don't recall seeing anything more recent. This does apply only to Fannie Mae.

My recent experience with a short sale makes me think banks will try for a foreclosure and deficiency judgment if they think there's something there.

I am current on my mortgage but have been out of work for a month. I have enough for 2 more months of not having a job. I am considering checking into a deed in lieu with BoA. Would I be better off going into a branch or just calling the 800 number?

Unfortunately my post is going to sound very negative, pessimistic and anti social, but based on sad reality of life.

The real estate slow down that started late 1991 in California hit its worst immediately after the earthquake.

People dealt with the situation in two distinctly different ways:

The first group (the civilized ones) went out of their way to accommodate the banks, maintain their properties and keep it in tip top shape, showing it to prospective buyers in hopes of minimizing the bank's loss and trying to get the best short sale offer.

Then there were those who stopped caring, and resorted to every leagle maneuver known and dragged the foreclosure process out to over a year without making payments.

The Banks responded by screwing up the credit of both the groups just as bad!

You chose to play just as dirty or be civilized. They will do what suits them…

What's worse is the fact that listing agents were going around talking people into short sale, convincing them that it won't affect their credit as bad as a foreclosure (simply lying) to get the listings.

raz