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Credit affect - deed in lieu and short sale

Posted on: 12th Dec, 2007 08:09 am
deed in lieu on both. I bought both of these properties thinking that because of the condition my taxes would be reduced, that did not happen. After I recieve the rent I still have to pay out of pocket for the taxes and insurance. I can no longer afford these homes I have tried to sell them, but the value in the area has dropped a lot. I owe $75,000 on one home their are a number of other houses in the area selling for as little as $10,000 or less. I was advised by my Realtor and attorney to do a deed in lieu. on both
Hi atlaswcc ,

Welcome to this forum.

You can try to do deed in lieu on both the properties but your lender will have to agree for that. So does your lender agree to do deed in lieu on both the properties?

For deed in lieu you credit score will drop almost 100 points and will be shown for seven years.

Thanks,
Larry
Posted on: 12th Dec, 2007 10:16 am
Oops! It was me above. I was logged out. Sorry for that.
Posted on: 12th Dec, 2007 10:19 am
Hi Larry,

May be you are trying to say that on going for deed-in-lieu, the credit of an individual drops by 100 points and the credit report reflects the deed-in-lieu as a negative item for 7 long years.

Since the market isn't doing well, so whether it's a short sale or a deed-in-lieu, the sale price won't be as high as would be helpful to pay down the mortgage debt. But the difference lies in the credit effects of short sale and deed-in-lieu. And, compared to short sale, deed-in-lieu has greater negative impact because in the former case, you are at least trying to sell the property and pay off the loan. Whereas, in the second case, you are surrendering the property to the lender because you can't afford to pay any more on your own. So, I feel you should go for short sale.

Thanks
Posted on: 13th Dec, 2007 04:27 am
The effect on your credit will be the same......It is viewed and noted as a foreclosure.
Posted on: 13th Dec, 2007 06:10 am
My two cents...I just attended a Short Sales/Foreclosure seminar held by an experienced realtor who has been "certified" as a Short Sales specialist...and was very knowledgeable about this topic. I will just pass on what he said: FICO scores are likely to drop 75-100 points for a Short Sale if not late, and 100-120 if there are mortgage lates.

A Deed in Lieu and Foreclosure are worse - up to a 250 point drop. As was mentioned, the Deed in Lieu must be approved by the lender, as does a Short Sale.

I freely must admit that this is not an exact science, as I don't think anyone can predict with great certainty the amount that an individual's FICO score will drop, but I provide the above just as another data point.

I have gone to another seminar held by a bankruptcy attorney, and since she is an attorney, her advice was to consult a BK attorney so you can be fully informed of all options. You might be able to get a free consultation.

Good luck,

Rick
Posted on: 13th Dec, 2007 12:04 pm
The figures don't seem to match - those given by larry and that of Rick. Rick, does this drop in points vary from one credit bureau to another? I don't think so but still not sure of it.
Posted on: 14th Dec, 2007 04:16 am
As mortgage brokers, we run credit reports through a middleman company. There are many that do this, so we do not talk with the credit bureaus directly. These "middlemen companies" are about as close to being experts as you can get. They freely admit that they cannot predict with 100% accuracy what the formulas are for the 3 credit bureaus. They come to our companies and give us presentations - and they make it clear that the credit bureaus keep these things very close to the vest.

Every person's credit history is unique. For example, if you had a FICO score of say, 620, and then had another inquiry, you might get a big drop on your FICO score. However, if your FICO score was 800, the drop wouldn't be as significant. So, what might be true for one person may not be true for another.

The credit bureaus purposefully will not reveal their scoring criteria.

So, I think the best someone can do is relate what their experience has been. There are many variables, and many things enter into establishing a FICO score. You can imagine how it would be essentially impossible to do a "controlled experiment" to see exactly how much your FICO score might drop between a foreclosure and a short sale. No two situations are exactly alike, so you can't compare apples to apples.

Sorry for the long answer, and I'd be happy to hear from someone who can add to this, but you're likely to get a fairly broad range of answers when someone tries to quantify how much your FICO score will go down.

What I passed on was what a local "expert" mentioned in a seminar he gave. Consider it another data point, as I imagine Larry and others have equally good sources for their numbers.
Posted on: 14th Dec, 2007 09:47 am
I read your response and am trying to negotiate with our bank right now.
We have one 30 day late but will have another soon. Is there anyway the bank will agree to not report the lates if we try to send some money every month while trying to sell? We have had our home on the market for 2 years and just dropped price again below market about 60,000. Nothing happening though as it is a resort in Utah. We will not clear any profit now and waiting to hear from bank about short sale.
Posted on: 10th Nov, 2008 08:53 am
Sorry, I would be very surprised if the bank will cooperate but it doesn't hurt to ask. I'm not sure what that will gain you as your credit score will certainly be affected once a short sale is consummated.
Posted on: 10th Nov, 2008 09:10 am
Hi noname,

I agree with Rick, you should ask the bank about it but I doubt whether they will agree to it or not. I think you should try for a short sale, because the impact on your credit will be much less than a foreclosure, or a deed in lieu or a bankruptcy. The FICO score is likely to drop by 75-100 points if you do a short sale but it will drop down by 250 points if you're on a deed-in-lieu or foreclosure.

Thanks.
Posted on: 11th Nov, 2008 01:53 am
Hi. So my house went into foreclosure or sold actually right away (10/08). Because of the bk7, the bank wouldn't do a short sale, deed in lieu, etc. or actually even work with me. so my question is, how long after sale does it take for the foreclosure to hit your credit reports? And if it's a bk 7 will the foreclosure just show up in the public section? I knew things were going downhill fast and did the bk7 right away so I don't have too many lates before I had to do this and I guess were creditors blocked from reporting any lates because I was in bk? My scores so far are a bit higher than expected but maybe the full impact hasn't hit just yet: TU 690, experian 593 and equifax I tihnk was 643. Different companies/websites that offer reports say different things. It's confusing. i.e. myfico is different than truecredit, etc. for the exact same three bureaus.
Posted on: 12th Nov, 2008 10:33 pm
hi incognito!

the foreclosure will show in your credit report once the sale is completed. i haven't heard of any time period within which it hits the record. yes, the foreclosure will be shown in the public section of the record.

yes, you are right that as you have declared chapter 7 bankruptcy, the creditors were not allowed to report for late payments for sometime. the credit scores can differ from one credit bureau to other because they have different parameters of judging your credit.

thanks.
Posted on: 13th Nov, 2008 03:43 am
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