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Washington State Distressed Real Estate Property Assets

At Navigation Real Estate, our goal is to provide our clients with a value-added partner in the acquisition and disposition of distressed real property assets. Our goal is to help owners maximize returns on distressed assets in a cost effective and efficient manner; and to help buyers identify, finance, and close on distressed real estate assets that meet our client's investment objectives.

With the unfortunate prospect of billions (more) in mortgage loan defaults on the horizon, combined with the widespread failure of modifications, lenders and investors will both benefit from the expert services of a firm that maintains the most up-to-date information on pricing trends, financing and deal points in distressed real estate transactions.

Because we meet regularly with banks and investors alike, we are well-positioned to deliver the advice necessary to obtain maximum value in the purchase and sale of distressed real estate assets.;

* Our Clients

Our clients include a wide range of owners and buyers of distressed real property assets, including but not limited to:

  • Banks
  • Corporations
  • REIT's
  • Institutional Investors
  • Individual Investors
  • Residential and Commercial Developers/Builders
  • Landlords/Tenants

* Distressed Asset Transactions

As a commercial brokerage, we provide a wide range of solutions for both buyers and sellers in virtually every type of distressed real estate transaction. We represent clients in the purchase and sale of:

  • Office
  • Retail
  • Raw/Developed Land
  • Multi-family
  • Industrial
  • Residential

* Experience

Our brokers' experience in distressed real estate includes not only brokerage purchase, sale services but also legal, consulting and land-use/entitlement.

Our managing broker, Jeffrey Foster, is a licensed attorney whose practice involves advising clients in distressed property transactions, bankruptcy, foreclosure and lender/borrower work-outs. Mr. Foster is involved in all Navigation purchase and sale transactions.

Brokers Christopher Foster and Mark Bertoldi both maintain extensive experience in advising lenders and buyers alike in distressed real estate transactions.

By employing their unique brand of "Facetime marketing", Mr. Foster and Mr. Bertoldi have developed an unrivaled reputation for bringing sellers and buyers together to close even the most difficult distressed real property assets.

 

Buying and Selling Bank-Owned Distressed Assets

Navigation Real Estate specializes in the marketing, acquisition and timely sale of bank-owned assets in the Puget Sound region. Our goal is to help owners maximize returns on distressed assets in a cost effective and efficient manner; and to help buyers identify, finance, and close on the most desired distressed real estate assets that meet our client's investment objectives.

For Banks

For Banks - Bank Owned Distressed Assets

Washington Broker Services For Bank-Owned Distressed Assets

At Navigation Real Estate, we proudly represent local, regional and national banks in the marketing and sale of non-performing real property assets. Such assets have become the real estate investment of choice for institutional and individual investor alike.

We have a proven track record of mitigating losses on bank-owned assets through strategic marketing, unique promotion and effective negotiations.

We represent lenders in the marketing and sale of all types of commercial and residential real estate, including but not limited to:

  • Commercial (office, retail, industrial)
  • Raw, permitted and developed land parcels
  • Multi-family Residential
  • Residential single-family

When listing a bank-owned asset, our first priority is to understand our client's loss mitigation objectives.

By listening to our clients, we are able to design a strategic marketing plan designed to maximize asset exposure and thus minimizing the time it takes to liquidate the non-performing asset.

After gaining a thorough understanding of our client's liquidation objectives, our brokers prepare an asset report in which we conduct research on the subject property. We then utilize this research to provide our opinion on how best to position the distressed asset for maximum resale value.

Based on our research and findings, we will present a broker's price opinion for the distressed asset along with our recommendations on asset positioning. We collaborate with our banking clients to provide the advisory and consulting services necessary to bring the distressed asset to market in a strategic and cost-efficient manner.

After arriving at a listing price, we commence with our unique brand of marketing the distressed asset to qualified buyers.

Navigation brokers employ a proactive "Facetime Marketing" strategy where we present our listings, in person, to our acquisition client base on a daily basis. By conducting such face-to-face meetings, our banking partners can be assured that their non-performing assets will be presented directly to a buyer pool who is ready, willing and able to purchase the distressed asset.

Our buyer-client relationships include institutional and high net worth individual investors, REIT's, as well as both residential and commercial developers and builders.

In addition to our proactive marketing methods, our banking clients receive the further benefit of our team-oriented approach to selling bank-owned assets. Our managing broker, Jeffrey Foster, is also a licensed (and practicing) Washington attorney. As a managing broker, Mr. Foster is personally and actively involved in each and every bank-owned listing and is available for consultation on pre and post foreclosure distressed asset strategies. Mr. Foster understands the importance and value timing can play when marketing an income generating distressed asset.

Unlike the traditional real estate brokerage who is forced to rely on outside legal counsel to draft or review contract or addenda verbiage and perform other legal functions in a distressed asset transaction, Mr. Foster acts expeditiously to perform such functions on all bank-owned transactions through his law firm. Furthermore, Mr. Foster provides his counsel and professional insight on asset reports, price opinions, as well as contract negotiating and closing strategies in all bank-owned real estate transactions.

We encourage prospective banking clients to contact us for more information on how our listing and sale services can be of benefit to your distressed asset inventory. We welcome your inquiries on our bank-owned broker services.

Please inquire through the Contact Us link on the website for more information or to schedule a time to discuss your acquisition goals with one of our brokers. To contact us by telephone, please call: (206) 442-9500 or in writing, by email at: info@navigationre.com

For Buyers

For Buyers of Bank Owned Distressed Assets

Brokers for Buyers of Bank-Owned Real Property Assets

At Navigation Real Estate, we represent institutional and individual investors in the acquisition of all types of bank-owned real property assets.

Our brokers represent buyers seeking to acquire:

  • Office
  • Raw, Permitted and Developed Land
  • Residential Multi-Family
  • Residential Single-Family

* Finding a Bank-Owned Property

Uncovering a profitable bank-owned property can be a challenging undertaking even for the most sophisticated real estate investor. The challenge of identifying a quality REO investment is matched only by a successful closing on terms that are favorable to the buyer.

We have found that the most successful bank-owned acquisitions begin by identifying properties prior to foreclosure.

Because our brokers maintain strong working relationships with credit and special asset officers at local, regional and national banks, we learn about commercial REO opportunities far in advance of the notice of foreclosure sale. We meet regularly with lenders who are seeking buyers for distressed properties in advance of the foreclosure auction.

* Making an Offer

Given the competition for bank-owned assets, the most important step in the acquisition process is the offer. However, offer strength is much more than simply drafting a purchase and sale agreement and submitting it to the bank for its review.

We have found that the key attributes to a strong bank-owned offer are communication and due diligence.

The communication element involves first identifying the appropriate contact person within the bank who has decision-making authority. In most cases, we have existing relationships with special asset managers and credit officers who we will meet with, in person, in order to understand the bank's position with respect to liquidating the asset.

By communicating directly with the bank's decision maker, we are able to identify the bank's position on the pricing and deal points that it will accept in liquidation.

After understanding the bank's position, it becomes our job to educate the bank on market conditions that may affect the bank's valuation of the property. We begin our due diligence on the acquisition target immediately after our client identifies a property of interest.

Our due diligence process involves conducting extensive market research (to the extent applicable) on closed sales, active listings, development costs, occupancy, rental rates and cash flow analysis. Through diligent research, we arm ourselves with the market data necessary to competently educate the bank on the true market value of the asset of interest to our client.

Through our pre-offer communication and due diligence, we are well-positioned to draft a competitive offer that will gain the attention of the bank and put our clients in a superior position compared to other offers.

* Drafting the Offer

In most offers, banks want buyers to believe that the offer must be in a standard form contract plus some onerous addendum that the REO seller insists upon.

The standard form offer template will likely include:

  • a short closing schedule
  • a title and escrow company of the bank's choosing
  • a short feasibility timeline
  • Buyer's waiver of sale contingencies
  • Buyer's payment of all expenses

Depending on the price point, the above-cited deal points may all be negotiated before coming to an agreement.  It is important for buyers to thoroughly understand the agreement they will be entering into as the contract will bind the buyer to perform on all deal points.

* Successfully Closing on a Bank-Owned Property

Identifying a bank-owned property and drafting a strong offer are merely the first steps in the lengthy and convoluted process that is involved with a bank-owned acquisition.

Once the parties agree on pricing and deal points, it is important to keep the bank updated on feasibility and other offer contingencies to be completed prior to closing. To this end, we maintain regular contact with our banking partners in order to move the property forward towards closing.

Alternatively, in the event the bank-owned property turns out to be infeasible or if our client desires to invoke a contingency to rescind the sale, we act quickly to notify the bank per the agreement in order to preserve our client's right to a refund of their earnest money.

Our brokers' effective communication and diligence throughout the entire process ensures our client's offer is properly positioned, negotiated and monitored through to a successful closing.

We welcome your inquiries on our bank-owned acquisition broker services.

 

Washington Short Sale Negotiation and Deficiency Balance


* What Is A Short Sale?

A short sale involves the sale of real property from seller to buyer in which the sale price is less than the seller owes to the lender.

A short sale may be a strategic decision by a property owner who owes the bank more than the property is worth; or it may be a decision based on the property owner's inability to afford mortgage payments. A successful short sale allows a property owner to avoid foreclosure and to suffer a lesser blow to a credit score than would incur if the property was auctioned in a foreclosure sale.

* Deficiency Balance

The most important aspect of a short sale is that a property owner must understand that he or she may be responsible to pay a deficiency balance to any lender who has a security interest in the property if that lender was not paid in full from the proceeds of the short sale.

Such lenders include but may not be limited to:

  • the primary (or 1st position) mortgage lender
  • a 2nd or 3rd position mortgage lender
  • Home equity line of credit (HELOC)
  • Judgment lien holder
  • Mechanic's lien holder

To illustrate, assume that a property owner owes $500,000 on a first mortgage and $150,000 on a second. Assume further that the property owner entered into a short sale for $480,000. In the absence of an agreement with one or both lenders, the property owner remains liable to both the first mortgage lender for $20,000 and the second position mortgage holder for the entire $150,000 loan balance.

Any remaining balance that a lender does not specifically agree to waive is called a deficiency balance and may be collected by way of a civil lawsuit. In order to waive the deficiency balance, an attorney must negotiate with all lenders to obtain a formal release of liability on the mortgage loan(s).

However, even with a skilled attorney on your side, a lender is under no legal obligation to release the property owner from a deficiency balance. This is why it is important to enlist the services of a lawyer and real estate broker who understands and practices bankruptcy law, short sale negotiations and foreclosure statutes.

* Short Sale Negotiations

At Navigation Real Estate, commercial and residential short sales are negotiated by our managing broker, who is also a licensed attorney.

Therefore, sellers and buyers alike can be assured that their transaction is not being handled by a realtor or her "short sale negotiator". A short sale negotiator is oftentimes a junior real estate agent or staff person in the realtor's office who, from our experience, is interested only in protecting the realtor's commission.

Our managing broker has consulted with many property owners who were wrongfully informed by their real estate agent that a successful short sale will relieve the property owner of any and all debt on their mortgage loans.

Only after the short sale has closed does the property owner discover that he or she owes tens or hundreds of thousands of dollars to the lender because the lender never agreed to release the property owner of such debt. In most cases, the property owner discovers that he or she still owes the deficiency only when a process server arrives at their doorstep with a lawsuit.

* The Short Sale Process

The process of a short sale is long and tedious.

After signing the listing agreement and required disclosure forms, the home is listed for sale on the multiple listing service as a short sale and a Navigation Real Estate sign is installed at the home. The home is priced in a manner designed to bring offers that our managing brokers can submit to the lender(s) for their approval.

In addition to the offers, the lenders require a litany of other financial documents, including but not limited to:

  • Tax Returns
  • Pay Stubs
  • Profit-and-loss statements (for self-employed persons)
  • Information about assets and asset value
  • A hardship letter describing the circumstances behind the short sale

After the lender(s) review the offer and requested documentation, the lender will begin short sale negotiations.

One of the first steps in the negotiation process is for the lender to perform a Broker's Price Opinion ("BPO"). The BPO is usually performed by a real estate agent who conducts a search for comparable market listings and sales in the area and drafts a report for the lender regarding his or her opinion on the market price of the property.

We review the BPO and provide the lender's short sale negotiator with facts and analysis on our price opinion, along with a description of deferred maintenance required on the property and any problems with the property that would skew the BPO.

Note, the BPO should include an inspection by the agent of the inside of the property (if a structure is located on the property). However, rarely does an agent performing a BPO actually perform such an inspection; hence the need for us to provide such information to the lenders.

Once the lenders decide on the price they will accept to convey title from seller to buyer, this price is provided by us to the buyer's agent. If the buyer accepts the lenders' terms, we begin the process of negotiating a deficiency waiver with the lenders if deficiencies were not addressed by the lenders in their short sale approval letter.

* Our Commitment To You

Our primary objective is for you to walk away from the property without owing a deficiency.

If we are unable to negotiate a deficiency waiver, you will have the option of cancelling the offer and waiting for a better offer; or to cancel the listing and pursue a bankruptcy filing or simply allow the lender to foreclose. Where there is only one mortgage on the property, (in many residential loans) the lender may not be entitled to a deficiency judgment under Washington law. However, where there is a second mortgage or other junior lien on the property, a deficiency judgment will be likely following foreclosure.

In order for a short sale to be approved, all lien holders must consent to the sale. If consent is not obtained, the buyer will purchase the property subject to existing mortgages and liens on the property.

* The Advantage Of Having A Licensed Attorney As Your Broker

When considering a short sale, it is vitally important to discuss your situation with an attorney experienced with foreclosure and bankruptcy.

Furthermore, a consultation with a CPA is necessary to understand the tax implications of a short sale since debt forgiveness may give rise to income tax liability to the property owner.

Since your situation may not be ideal for a short sale, it is best to conduct extensive due diligence on the process before embarking upon a short sale.

At Navigation Real Estate, our managing broker is also a licensed attorney whose legal practice involves foreclosure, bankruptcy, loan workouts and real estate.

If you are considering a short sale, our managing broker will conduct an extensive consultation to provide you with all your legal options before we move forward with attempting a short sale on your property.

If you are interested in discussing your short sale options, we encourage you to contact us today. We can be reached at (206) 442-9500 or by email at info@navigationre.com.

 

Deficiency Judgment in Washington State


* What is a deficiency judgment?

A deficiency judgment is a civil court judgment following the sale of a property for less than the amount owing to the lender. A deficiency judgment begins with a lawsuit (summons and complaint) filed by a lender against a borrower, and usually concludes with a judgment entered against the borrower for the amount due and owing to the lender.

* When does a deficiency judgment occur?

A deficiency judgment may arise out of one of the following events:

  • Foreclosure
  • Short sale
  • Deed-in-lieu of foreclosure
  • Post-default

1. Foreclosure

In the state of Washington, a lender who forecloses on a primary residence is not entitled to obtain a deficiency judgment against a borrower.  RCW 61.24.100 sets forth the relevant Washington law regarding deficiency judgments following foreclosure sale. 

Deficiency judgments - Foreclosure - Trustee's sale - Application of chapter.

     (1) Except to the extent permitted in this section for deeds of trust securing commercial loans, a deficiency judgment shall not be obtained on the obligations secured by a deed of trust against any borrower, grantor, or guarantor after a trustee's sale under that deed of trust.

     (2)(a) Nothing in this chapter precludes an action against any person liable on the obligations secured by a deed of trust or any guarantor prior to a notice of trustee's sale being given pursuant to this chapter or after the discontinuance of the trustee's sale.

     (b) No action under (a) of this subsection precludes the beneficiary from commencing a judicial foreclosure or trustee's sale under the deed of trust after the completion or dismissal of that action.

     (3) This chapter does not preclude any one or more of the following after a trustee's sale under a deed of trust securing a commercial loan executed after June 11, 1998:

     (a)(i) To the extent the fair value of the property sold at the trustee's sale to the beneficiary or an affiliate of the beneficiary is less than the unpaid obligation secured by the deed of trust immediately prior to the trustee's sale, an action for a deficiency judgment against the borrower or grantor, if such person or persons was timely given the notices under RCW 61.24.040, for (A) any decrease in the fair value of the property caused by waste to the property committed by the borrower or grantor, respectively, after the deed of trust is granted, and (B) the wrongful retention of any rents, insurance proceeds, or condemnation awards by the borrower or grantor, respectively, that are otherwise owed to the beneficiary.

     (ii) This subsection (3)(a) does not apply to any property that is occupied by the borrower as its principal residence as of the date of the trustee's sale;

     (b) Any judicial or nonjudicial foreclosures of any other deeds of trust, mortgages, security agreements, or other security interests or liens covering any real or personal property granted to secure the obligation that was secured by the deed of trust foreclosed; or

     (c) Subject to this section, an action for a deficiency judgment against a guarantor if the guarantor is timely given the notices under RCW 61.24.042.

     (4) Any action referred to in subsection (3)(a) and (c) of this section shall be commenced within one year after the date of the trustee's sale, or a later date to which the liable party otherwise agrees in writing with the beneficiary after the notice of foreclosure is given, plus any period during which the action is prohibited by a bankruptcy, insolvency, moratorium, or other similar debtor protection statute. If there occurs more than one trustee's sale under a deed of trust securing a commercial loan or if trustee's sales are made pursuant to two or more deeds of trust securing the same commercial loan, the one-year limitation in this section begins on the date of the last of those trustee's sales.

     (5) In any action against a guarantor following a trustee's sale under a deed of trust securing a commercial loan, the guarantor may request the court or other appropriate adjudicator to determine, or the court or other appropriate adjudicator may in its discretion determine, the fair value of the property sold at the sale and the deficiency judgment against the guarantor shall be for an amount equal to the sum of the total amount owed to the beneficiary by the guarantor as of the date of the trustee's sale, less the fair value of the property sold at the trustee's sale or the sale price paid at the trustee's sale, whichever is greater, plus interest on the amount of the deficiency from the date of the trustee's sale at the rate provided in the guaranty, the deed of trust, or in any other contracts evidencing the debt secured by the deed of trust, as applicable, and any costs, expenses, and fees that are provided for in any contract evidencing the guarantor's liability for such a judgment. If any other security is sold to satisfy the same debt prior to the entry of a deficiency judgment against the guarantor, the fair value of that security, as calculated in the manner applicable to the property sold at the trustee's sale, shall be added to the fair value of the property sold at the trustee's sale as of the date that additional security is foreclosed. This section is in lieu of any right any guarantor would otherwise have to establish an upset price pursuant to RCW 61.12.060 prior to a trustee's sale.

     (6) A guarantor granting a deed of trust to secure its guaranty of a commercial loan shall be subject to a deficiency judgment following a trustee's sale under that deed of trust only to the extent stated in subsection (3)(a)(i) of this section. If the deed of trust encumbers the guarantor's principal residence, the guarantor shall be entitled to receive an amount up to the homestead exemption set forth in RCW 6.13.030, without regard to the effect of RCW 6.13.080(2), from the bid at the foreclosure or trustee's sale accepted by the sheriff or trustee prior to the application of the bid to the guarantor's obligation.

     (7) A beneficiary's acceptance of a deed in lieu of a trustee's sale under a deed of trust securing a commercial loan exonerates the guarantor from any liability for the debt secured thereby except to the extent the guarantor otherwise agrees as part of the deed in lieu transaction.

     (8) This chapter does not preclude a beneficiary from foreclosing a deed of trust in the same manner as a real property mortgage and this section does not apply to such a foreclosure.

     (9) Any contract, note, deed of trust, or guaranty may, by its express language, prohibit the recovery of any portion or all of a deficiency after the property encumbered by the deed of trust securing a commercial loan is sold at a trustee's sale.

     (10) A trustee's sale under a deed of trust securing a commercial loan does not preclude an action to collect or enforce any obligation of a borrower or guarantor if that obligation, or the substantial equivalent of that obligation, was not secured by the deed of trust.

     (11) Unless the guarantor otherwise agrees, a trustee's sale shall not impair any right or agreement of a guarantor to be reimbursed by a borrower or grantor for a deficiency judgment against the guarantor.

     (12) Notwithstanding anything in this section to the contrary, the rights and obligations of any borrower, grantor, and guarantor following a trustee's sale under a deed of trust securing a commercial loan or any guaranty of such a loan executed prior to June 11, 1998, shall be determined in accordance with the laws existing prior to June 11, 1998.


2. Short Sale

Lenders regularly seek and obtain deficiency judgments from borrowers after a short sale is consummated.

Oftentimes borrowers are under the mistaken belief that a short sale automatically relieves the borrower of his or her obligation to repay one or more mortgage loan and avoid a deficiency judgment.

This is incorrect. In order to be relieved from further obligations on a promissory note, the borrower must obtain a legally enforceable release of liability from the lender for ALL mortgage loans on the property.

A short sale approval only authorizes the transfer of clear title to the new buyer. A lender is not required to grant any debt relief to a borrower in a short sale. The debt relief component of the short sale is a separate negotiation that should be handled only by an attorney experienced with such negotiations.

Note, negotiations must be entered into with any and all lenders, including but not limited to first position mortgage lenders, second position mortgage lenders, home equity line(s) of credit lenders, as well as judgment and other lienholders in order to "walk away" from the property with no remaining debt obligations.


3. Deed-in-lieu

Not unlike a short sale, a lender is capable of obtaining a deficiency judgment against a borrower after a deed-in-lieu transaction. Any debt relief must be separately negotiated in a deed-in-lieu transaction. A deed-in-lieu occurs when the borrower agrees to transfer the deed back to the bank and avoid a foreclosure.However, by entering into a deed-in-lieu transaction with a lender, there is no debt relief unless it is negotiated.

Like a short sale, an attorney experienced with debt relief should be retained by the borrower to negotiate debt relief in a deed-in-lieu transaction.


4. Post Default

Recently, we have seen a troubling trend in which lenders are filing lawsuits against borrowers prior to foreclosure and after a borrower defaults on a second mortgage, home equity line of credit or other junior mortgage loan obligation.

These post-default lawsuits are oftentimes filed where there is no equity securing the junior lien and where the lender will receive no proceeds from a foreclosure on the property.

While not technically a deficiency judgment (since the lawsuit is filed while the borrower still technically owns the property), a post-default lawsuit grants the lender the same remedies as a deficiency judgment (see below).  If you have been served with a post-default lawsuit, it is imperative that you retain an attorney experienced in real estate litigation to advise you on your legal rights as soon as possible.

* What can a lender do after obtaining a deficiency judgment?

After a lender obtains a deficiency judgment, it can pursue a number of potentially disastrous legal options, including but not limited to:

  • Wage garnishment
  • Attach a lien on real property (i.e. primary or secondary residence)
  • Attach a lien on personal property (i.e. vehicle)
  • Levy bank accounts
  • Seize personal property

A lender may also conduct a deposition called "supplemental proceedings" to ask you questions about your job, assets and finances.

If you have received a document entitled Notice of Supplemental Proceedings, you must contact an attorney immediately. If you fail to appear or comply with the instructions in the supplemental proceedings, you may risk the issuance of an arrest warrant to compel your appearance at a court hearing.

* How do I avoid a deficiency judgment?

The first step any borrower should take when faced with the probability of a mortgage default is to consult with an attorney experienced in foreclosure, debt and bankruptcy. Formal options to avoid a deficiency judgment include but may not be limited to:

  • Short Sale and Debt Relief Negotiation
  • Chapter 7 Bankruptcy
  • Chapter 13 Bankruptcy
  • Deed-in-lieu of foreclosure and Debt Relief Negotiation

At Navigation Real Estate, our broker is also an attorney experienced with debt resolution, distressed property disposition and bankruptcy matters.

Jeffrey Foster represents individuals and businesses facing default and foreclosure and offers a free consultation with Navigation Real Estate clients.

Please feel free to contact us directly at: (206) 442-9500 (toll-free: 1-800-206-6122), or by email at: info@navigationre.com to schedule an appointment with one of our brokers.

 

Washington Foreclosure vs. Short Sale


Homeowner's Consequence

Foreclosure

Short Sale

Future Conventional Loan -
Primary Residence

Under current guidelines, a homeowner who loses a home to foreclosure is ineligible for a Fannie Mae-backed mortgage for a period of 7 years.

A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage in as little as 2 years

Future FHA Loan -
Primary Residence

A homeowner who loses a home to foreclosure is ineligible for a FHA loan for a period of 3 years from completion date.

A homeowner who successfully negotiates and closes a short sale will be eligible for a FHA backed mortgage in as little as 3 years.

Future VA Loan -
Primary Residence

A homeowner who loses a home to foreclosure is ineligible for a VA loan for a period of 2 years from completion date.

There is no specific information on this yet, assume foreclosure rule of 2 years.

Future USDA Loan

A homeowner who loses a home to foreclosure is ineligible for a USDA loan for a period of 3 years from completion date.

There is no specific information on this yet, assume foreclosure rule of 3 years.

Future Loan with any Mortgage Company - Disclosure Guidelines

On any future 1003 application, a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 that asks "Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?" this will affect future rates.

There are no similar declarations or question regarding a short sale.

Credit Score

Score may be lowered anywhere from 250 to over 300 points. Typically will affect score for over 3 years.

Only late payments on mortgage will show and after sale mortgage will be reported as paid or negotiated. This will lower the score as little as 50 points if all other payments are being made. A short sale's affect can be a brief as 12 to 18 months.

Credit History

Foreclosure will remain as a public record on a person's credit history for 10 years or more.

A Short sale is not reported on a credit history. There is no specific reporting item for 'short sale'. The loan is typically reported 'paid in full, settled'.

Security Clearances

Foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony. If a client has a foreclosure and is a police officer, in the military, in the CIA, Security, or any other position that requires a security clearance in almost all cases clearance will be revoked and position will be terminated.

A Short Sale on its own does not challenge most security clearances.

Current Employment

Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure in many cases is ground for immediate reassignment or termination.

A short sale is not reported on a credit report and is therefore not a challenge to employment.

Future Employment

Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment.

A short sale is not reported on a credit report and is therefore not a challenge to employment.

Deficiency Judgment

If you have a junior mortgage (2nd mortgage, HELOC) or lien on the property (judgment lien, mechanic’s lien), the junior mortgage or lienholder may file a civil lawsuit against a foreclosed homeowner to obtain a deficiency judgment that may be utilized to garnish wages, lien other properties, etc.

In some successful short sales it is possible to convince the lender to give up the right to pursuit a deficiency judgment against the homeowner.

Please feel free to contact us directly at: (206) 903-1836, or by email at: info@navigationre.com to schedule an appointment with one of our brokers.