How a Short Sale, Foreclosure and 30 Days Late on a Mortgage Affect Your FICO score.

By Troy Corman,

Working in real estate and dealing with home sellers and renters in today's marketplace, you get a first-hand look at the financial damage many individuals have recently encountered. Short sales, foreclosures, and bankruptcies are a common theme.

Like most, I was surprised to find that the credit destruction from both a short sale and a foreclosure is quite similar. After reading a blog entry, Credit Scoring Impacts Short Sale vs Foreclosure by Massachusetts Realtor Bill Gassett, I thought this information was too valuable to keep to myself. Thanks Bill for a great article!

So how does a short sale affect your FICO score, or credit score? Surprisingly, you'll find that a short sale and a foreclosure have very similar effects on your credit score. As you'll see in the chart above, a person who starts out with a credit score of 680, can expect his or her credit score to drop to 575-595 after a short sale AND it's the same reduction for a foreclosure. A bankruptcy even does more damage as it will drop the said 680 credit score to the 530-550 range.

Also, just being 30 days late on your mortgage really hammers your credit score. As you'll see in the FICO chart, a 30-day late payment reduces the 680 credit score to the 600-620 credit score range.

So how long does it take to restore your credit after a short sale, foreclosure or 30-day late payment on a mortgage? Well according to FICO, the higher your original credit score, the longer it takes to restore that credit score to it's previous level. A 30-day late mortgage payment would take about 9 months to get back to the 680 level if you started out there. Unfortunately, it would take about 2.5 to 3 years to get back to a 720 FICO or 780 FICO, respectively.

A short sale is still better than having a home foreclosure. A short sale on a Fannie Mae loan will allow you to buy a home sooner - within about 2 years. With a foreclosure on a Fannie Mae loan, you'll have to wait 5 years to purchase another home and 7 years if you suffer a foreclosure on an investment home.

If you need to buy, sell or get a home leased, contact me at 214.690.9682, or email troycorman@t2realestate.com.

Troy Corman is the founder of t2 Real Estate LLC, a Dallas real estate firm providing specialized knowledge with a hands-on approach. Specialties include residential real estate brokerage, land and acreage, and commercial real estate services. Contact us today at 214.827.1200 if you need to sell, buy or get your DFW property leased.
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An Inside Look at the Dallas Real Estate Market.

By Troy Corman, www.t2realestate.com

Photo above is a short sale home at 3165 West Alamosa in Terrell, Tx.

As we continue to get better DFW and Texas housing news, I wanted to take a more detailed look into what homes, and price points, are really moving. The numbers below are encouraging. With 30-year mortgage rates below 4%, let's hope the positive Dallas home sales trend even picks up some steam!

Below is a comparison of DFW home sales that occurred from July 5, 2011 through October 5, 2011 versus a year ago. Statistics are from the North Texas Real Estate Information System (NTREIS).

Dallas homes sold in the $100,000 to $150,000 range are up 19% in 2011.
Dallas homes sold in the $150,000 to $200,000 range are up 18% in 2011.
Dallas homes sold in the $200,000 to $275,000 range are up 16% in 2011.
Dallas homes sold in the $275,000 to $350,000 range are up 12% in 2011.
Dallas homes sold in the $350,000 to $500,000 range are up 5% in 2011.
Dallas homes sold in the $500,000 to $750,000 range are up 27% in 2011.
Dallas homes sold in the $750,000 to $1,000,000 range are down 11% in 2011.
Dallas homes sold in the $1,000,000 and up range are down 14% versus 2010.

If you have a home to sell priced below $750,000, the numbers and trend appear to be moving in your favor!

To find out what your home is worth, contact me for a free no-obligation analysis at 214.690.9682, or email troycorman@t2realestate.com.

Troy Corman is the founder of t2 Real Estate LLC, a Dallas real estate firm providing specialized knowledge with a hands-on approach. Specialties include residential real estate brokerage, land and acreage, and commercial real estate services. Contact us today at 214.827.1200 if you need to sell, buy or get your DFW property leased.
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We Have Liftoff. DFW Home Sales Up 27% in August.

By Troy Corman, www.t2realestate.com

Has the DFW residential real estate market turned the corner? According to The Dallas Morning News and data from the Texas ATM Real Estate Center, north Texas home sales exploded in August, up 27% over August 2010.

July also recorded double-digit Dallas home sales increases as sales of townhomes and condominium homes soared upward 34% from a year earlier.

Low mortgage rates and good home deals seem to be finally motivating qualified home buyers off the fence. Also, a tight rental market and rapidly rising rents are making home ownership more attractive from a financial perspective.

Texas ATM Real Estate Center's Jim Gaines said, "This home rebound is a lot better than we thought it would be. If this pattern continues, we could be up 10% or more for the year."

Carrollton-Farmers Branch homes sold were up 60%. Northeast Dallas homes were up 59%, and Park Cities home sales were up 49%.

DFW area home prices are flat for the year but were up 2% in August.

Also, the inventory of homes for sale was 17% below last year, with just over a 7 month supply. Six months of inventory is considered a balanced, healthy market.
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Texas ATM Economist Mark Dotzour on his Texas Real Estate Forecast.

Texas population expected to double by year 2030 (another 30,000,000 people)

By Troy Corman, www.t2realestate.com

I had the pleasure of hearing Texas ATM Real Estate Center economist Dr. Mark Dotzour speak about the Texas real estate market at a live event last night sponsored by the Texas real estate investor group, Lifestyles Unlimited. I'll generally paraphrase and try to hit the highlights of what Dr. Dotzour sees for the Texas economy, and in particular, the Texas real estate markets going forward.

In all, Dr. Dotzour was very bullish on Texas and our real estate market. One of the most vivid examples is this - imagine Texas having another Dallas-Fort Worth metro-plex, another Houston, another Austin, another San Antonio and another Corpus Christi by the year 2030 - about 18 years from right now! If the demographic experts are correct, expect the Texas population to increase by 30,000,000 by 2030. That's a lot of folks that are going to need roofs over their heads.

That's one of the reasons Dr. Dotzour thinks we're going to have a lot of pent-up demand for home ownership as soon as Washington gets their act together. In fact, he thinks the economy is "spring-loaded", and as soon as Washington takes the right steps, our economic recovery could really rocket to the upside.

Dr. Dotzour also touched on inflation quite a bit. He thinks the gold bugs are continuing to buy gold because they believe Washington and Ben Bernanke will continue to print money. That's why he likes rental real estate as a hedge, because regardless of the value of the dollar, folks will always need a place to live. If the dollar is greatly devalued, it takes more dollars to buy or rent real estate, yet landlords who already own real estate have locked-in mortgages at lower values.

Gold is much more volatile than real estate because it's a speculative commodity. As soon as correct policies begin coming out of Washington, gold prices could drop like a rock - just like they did in the 1980s when Paul Volker raised interest rates.

The commercial real estate, and to some extent, the residential real estate market is still clogged up with bad loans. The problem is the FDIC doesn't have the money to rescue banks on a wholesale level, so banks are slow to foreclose, because once they foreclose, they're required to have more capital to offset the bad loan. Many are still in the extend-and-pretend phase, and this is choking off commercial real estate lending.

There's been talk of Fannie Mae and Freddie Mac buying up bad mortgages from banks and taking over homes. It's not clear whether the government wants to be America's landlord or what their thinking is on that idea. It's also quite clear that the government has done little to accommodate real estate investors. A couple of simple solutions offered by Dr. Dotzour to clean up the real estate mess: 1) Allow investors to double the velocity of appreciation to 15 years instead of 27.5 years and; 2) Allow investors who buy and hold real estate for 5 years to pay no capital gains taxes on profits. This drew quite a bit of applause from the crowd.

Finally, Dr. Dotzour is bullish on Texas and thinks there's a window of opportunity to buy now and be ahead of the curve when the real estate markets get moving again. In fact, he said the state bird of Texas, is the construction crane!
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Foreclosure Versus Short Sale. How Each Affect Your Credit.

By Troy Corman, www.t2realestate.com

The following is a quick reference and general guide for those considering a "short sale". A short sale is defined as a lender (bank) accepting less than is owed on the current owner's mortgage loan. A short sale isn't ideal for your credit report but it is much better than having a foreclosure on your credit history. We'll compare the two scenarios below.

Fannie Mae Loan - On a primary residence, a homeowner who loses a home to foreclosure is ineligible for a Fannie Mae-backed mortgage for 5 years. A homeowner who successfully negotiates and closes a short sale will be eligible after only 2 years.

Fannie Mae Loan (non-primary residence) - A foreclosure would prevent the buyer, or investor, from using a Fannie Mae-backed investment mortgage for 7 years. An investor who successfully negotiates and closes a short sale will be eligible after only 2 years.

Credit Score - On a recorded foreclosure, your credit score will be lowered from 250 to more than 300 points. Typically, it will affect credit score for over 3 years. On a short sale, the mortgage is normally reported as "paid as agreed", "paid as negotiated", or "settled". Only late payments on the mortgage will show. A short sale can lower your scores as little as 50 points if all other payments are made. A short sale's effect can be as brief as 12 to 18 months.

Credit History - Foreclosure will remain as a public record and on a person's credit history for 10 years or more. A short sale is not reported on your credit history.

Security Clearance - Foreclosure is the most challenging issue against a security clearance outside of a serious misdemeanor or felony conviction. Positions in the police force, military, CIA and security fields usually result in termination. A short sale, on it's own, does not challenge most security clearances.

Current Employment - Employers have the right and are actively checking the credit of all employees who are in sensitive positions. In many cases, a foreclosure is reason for immediate reassignment or termination. A short sale is not reported on a credit report, and is therefore, usually not a challenge to employment.

Future Employment - Many employers are requiring credit checks on all job applicants. A foreclosure can challenge employment. A short sale is not reported on a credit report and therefore, should not challenge future employment.

Deficiency Judgment - In 100% of foreclosures (except in those states where there is no deficiency), the bank has the right to pursue a deficiency judgment. In some successful short sales, it is possible to convince the lender to give up the right to pursue a deficiency judgment.

The preceding information is a general guide and is not legal advice. If you're in dire straits, please consult real estate or legal counsel as soon as possible. Best of luck!
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How To Use Your IRA To Invest In Cash-Flowing Real Estate Penalty Free.

By Troy Corman, www.t2realestate.com

With interest rates on CDs and bank savings rates close to nil, many are searching for ways to both protect and grow their money.

To me, it's a no-brainer. Investment real estate is on sale. Home mortgage rates are at or within a whisker of all-time lows. The demand for rental housing is EXPLODING, and rental rates are going through the roof. Folks are moving to Dallas and the other major Texas cities in droves. So why not take action?

If you have money in your retirement account, you can buy real estate to live in or to invest in, penalty-free.

Investment real estate can be bought, rehabbed and managed through an IRA custodian. There are a few around, and I used a company called PENSCO, out of San Francisco, but there are also Texas companies that do this as well.

Since the money is coming from an IRA, or Roth IRA, you cannot benefit financially from this transaction until you reach your retirement age. The down payment, closing costs, insurance, property taxes and repairs/rehab all have to be financed via your IRA. You are not allowed to co-mingle personal funds with your IRA funds in any fashion.

The monthly rent is to be paid to the IRA custodian, who will then deposit the monies into your IRA account.

The only drawback is that you won't get to take advantage of some of the great personal tax deductions that investment real estate provides, like mortgage interest, depreciation, repairs and insurance. However, there are plenty of distressed properties, foreclosures and short sales to choose from right now and an oversupply of renters. I don't see that changing much in the next year or two.

In most investments, you can never be exactly sure how it's going to turn out. For me, personally, I like to see a tangible building or lot that I can touch and feel. Also, I like knowing that I'm protected from catastrophic loss with property insurance, so my downside risk is small.

As Peter Lynch, the famous stock picker once said, "most people spend more time researching the refrigerator they're going to buy, than a stock they invest in". So please at least look into real estate investing, and protect you and your family's future from the corporate and political shenanigans that affect the stock market.

Let me know if I can help or answer any questions you may have. Best of luck!
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Troy Corman is the founder of t2 Real Estate LLC, a Dallas real estate firm providing specialized knowledge with a hands-on approach. Specialties include residential real estate brokerage, land and acreage, and commercial real estate services. Contact us today at 214.827.1200 if you need to sell, buy or get your DFW property leased.

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Government Considering Renting Out Foreclosures

WJS.com video posted by Troy Corman, t2realestate.com


The rental home market is booming. Landlords are delighted as rental demand is fueling multiple rental applicants and higher rent prices. Now, the US government is considering getting in on the action by making it more attractive for private investors to buy, rehab and lease foreclosed homes owned by Fannie Mae and Freddie Mac.

The top 5 ways real estate can make you money.
1. Cash Flow - renters pay more each month than the home's carrying cost.
2. Principal Pay Down - rent money pays down our mortgage each month.
3. Equity Capture - we buy homes for thousands less than they're worth.
4. Appreciation - we sell homes in a sellers market when prices are rising.
5. Depreciation - rent homes produce about $10K in deductions per $100K home annually.
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Read the full story in wsj.com.