700 credit score but thinking of foreclosure and wondering how long will it take for my credit to recover?

This question was asked on Trulia real estate search here and answered to my best ability below.

700 credit score but thinking of foreclosure and wondering how long will it take for my credit to recover?

Q: My 1/1,5 condo in NMB Fl was purchased for $137K in 2006 BUT the complex now has units selling for $17K-$24K. We also have about 25% units in foreclsoure and almost 65% of the owners are not paying HOA fees. I am thinking of sending the keys to the bank because the builiding will probably be shut down by the city because the HOA cant pay its monthly bills and it was already sitting on $180K in unpaid HOA fees at the start of 2009 . I hate to see my credit go in the toilet but I cant wrap my brain around holding onto a property that has decreased 85% in value in the last year. I am a responsible person and paying all other bills on time. I was never late with my mortgage payment in the 3 years since I purchased. The bank wont consider lowering the principle which in my opinion would be the TRUE way to help in part save the economy. But that is just my 2 cents which is now valued at -$5 due to depreciation. Thanks for any advice!

A: Whew, that’s a tough call. Where’s the Suze Orman of real estate when a good question like this one pops up!? It seems as though the association/condo board have failed at going after delinquent fees needed to maintain the building. Delinquent payments are very common in all condo buildings yet at this high level of 65%, it a surprise the water is still on. The new Fannie Mae guidelines from January 2009 would not allow financing so it would have to be geared to cash investors yet no investor would take on the liability of covering everyone elses slack with inevitable assessments on the horizon.

A Deed in Lieu of foreclosure may be the most viable option although speak to your bank(s) in all honesty on the current circumstances and be sure to negotiate DOWN the deficiency lien. Do not take no for an answer and keep climbing the peon ladder until the manager can help. I say this only because I’m afraid a short sale just won’t fly from lack of a ready willing & able buyer. IF you could find a buyer, then please jump on the short sale option making sure there are no deficiency liens or 1099’s if it’s an investment property. I assume this is your “home.” I also heard an interesting concept yesterday where it MAY be that FICO (credit) scores will be weighted in favor of owners such as yourself who are forced into foreclosure or hand over their properties between the years of let’s say 2005-2009. Meaning less likely to greatly “break” the FICO instead weighted and factored in favor on the years of trouble down the road when you feel it’s time to borrow again. Just an idea that may make sense in the future because of the current circumstances (not a fact but likely).

It’s been a tough battle over the last 4 years for a large majority of owners in similar circumstances as property values tumbled. This building WILL eventually turn around after a financial correction and an efficient condo board is established. Miami Dade residential sales are up 67% over this time last year and 20% over March! Stay positive & strong no matter how bad it gets and remember this simple (& odd) advice from my father when I’ve have hard problems to swallow… “they can’t kill you!”

I am open to more ideas & opinions and my answers can be wrong as a fallible sales associate.. This is only opinions and advice from today’s knowledge/understanding and I welcome any further insights I may be unaware of.

About Ashton Coleman

Ashton is a technology & social media savvy professional who understands the industry providing white-glove service with a wealth of experience, an impeccable reputation and a keen ability to efficiently handle all facets of real estate. Ashton’s territory has grown significantly since 2002, marketing & selling extraordinary South Florida coastal real estate from Miami Beach to Lighthouse Point. A Certified Luxury Homes Marketing Specialist (Million Dollar Guild), with a multitude of other residential certifications, Ashton provides both exceptional service and unique selling techniques. His success is attributed to an unparalleled work ethic with years of experience including top-tier professional services where the ‘art of the deal’ is mastered in contract negotiations, deal-making intricacies and the end, results-driven real estate.

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5 thoughts on “700 credit score but thinking of foreclosure and wondering how long will it take for my credit to recover?

  1. Excellent blog post…
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  2. I went into an agreement with my sister that if I bought a house b/c my credit was good she would be solely responsible for ALL financial dealings; mortgage, household fixings and etc.. Where the house was bought was in an area were developers were buying houses just for the land b/c they were going to build a new school and a lot of the houses had already been bought and torn down. Well, she rented it out and the mortgage was being paid that way. Somewhere down the road she got behind on payments b/c the renters weren’t paying and left. She never told me she was behind on payments. Remember, she agreed to all financial dealings. Well, I went out of the country and when I came back a big family dispute came up and she no longer speaks to ANYONE in the family. She has all the paperwork on the house; including closing paperwork, letter of agreement to take full financial responsibility on house and etc… Over, the first few months I asked how things were going and she said, “fine” no problems. Well, since family dispute I thought it might be a good idea to get credit report for me and found out she got 3-4 months behind and the house went into foreclosure. She never once came to me to let me know she couldn’t pay for it or that she was that far behind. I am now in the market for buying a house of my own with future husband and I am worried this issue is going to hurt us in getting our first home together. My credit score was 720 when I checked previously to getting the house with her. What affect does foreclosure have on credit scores. I have things paid off on my credit report; car load, student loans, and credit cards. This was the first house purchase for me and I so upset and don’t know what to do. Can anyone give me advice. Oh yeah, she will not return phone calls, don’t have email address or home address. please someone help me.

  3. Hi Jeri,
    So I take it you cosigned because of your high score? A foreclosure will almost ruin your score. I would consult with an attorney on options and explore a short sale alternative which will bruise your score vs. a complete break on your good name. The lack of communication makes it extremely difficult to get anywhere with your sister so it’s time to bring in legal help.

  4. Wonderful read, thanks. It’s much easier to understand now what a credit report is really about and how it is helpful. Even if not in debt, keeping a well cared for credit score is really important.