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Has anyone had to shortsale/foreclose? If so, how badly did it affect your credit and/or did you have excessive trouble finding alternate housing for your family? I have a good friend with children who is seriously debating which route to take, and she is being told that lenders are changing their views on a person's credibility strictly based on credit (as so many people now have been forced to foreclose). I'd like to offer her some good advice/anecdotes, but I've never found myself in a similar situation.”

3 replies so far...

  • Thanks ladies. So, Oceans Mom, it seems that the info you provided is almost dead on to what her attorney told her. In fact, her attorney told her to foreclose for sure...She said that he even suggested that many people are doing this to get out from under theif negative mortgages...foreclosing on purpose?! Gosh, I never thought we'd see the day that people are going to foreclose on purpose...the current home situation is so detrimental to so many :(

    The only other thing it seems she's worried about is renting. I don't think she plans on purchasing a home for awhile now (seeming that it's not the best investment right now). But, in the meantime, she's concerned that the credit will even prevent her from renting. Do you know if that's a huge issue for people who foreclose...I think she's had perfect credit up to this point.

    Sorry for all the Q's. She's my best friend and I feel so bad for her, just trying to help her as much as possible.

    Thanks again!

    Flag as inappropriate Posted by Meredith on 20th May 2010

  • This is what I do for a living so I think I can help you out with this one. With a short sale, it depends on the bank. Most short sales wont be much better, if any better, than a foreclosure for your credit. There are a few banks, however, that will forgive the debt completely by doing a short sale. Your friend needs to find this out before doing anything. Many banks wont cover all of the expenses in a short sale (water bill liens, closing costs, etc) and it can cost the seller thousands to close. Many times, these also happen to be the same banks that do not forgive the debt so the seller is pretty much wasting money when they could have foreclosed for free and had the same damage. Now, again, depends on the bank but if your friend has a bank that will not fogive the debt (which is most of them) then your friend will have one heck of a time finding housing for a very long time. The best thing to do is talk to an attorney and possibly file bankruptcy. I hate to throw out names but if your friends loan is with B of A or Chase, don't bother with a short sale. Or if she has a equity line on the house, get an attorney. Equity lines, no matter what the bank, will still remain as a collectable amount even after the house is sold.

    Flag as inappropriate Posted by oceans mom on 18th May 2010

  • Your friend needs to contact a lawyer, period. One of our friends recently foreclosed on an investment property he'd purchased for his children down the line. He decalred bankruptcy before doing so in order to preserve his remaining (few) assets. BUT, the only way your friend is going to get out of this in any way that will help her re-build her life is to consult with a lawyer who is experienced with this sort of thing.

    Flag as inappropriate Posted by Phe on 11th May 2010