California Economist comes to Intero

We had Carole Rodoni in the Saratoga Office recently giving her economic and housing forecast…check it out.  The whole thing is about an hour, but worth it. She speaks on The Two Americas: The San Francisco Bay Area & The Rest of the Country. Here' the first of three videos:





And here's links to the other two video segments:

Part 2
Part 3

Being FICO wise

By Chris Moles, Brokerage Counsel, Intero Real Estate, Inc.

A recent study shows that foreclosures and short sales have a similar immediate impact on a property owner’s Fair Issac Company (FICO) Score.

Data from the three major credit reporting agencies suggests that a typical distressed homeowner with a FICO score of 620 was likely to see his score fall to between 575-595 after either closing a short sale or defaulting to foreclosure. The same study suggested that those with a score of 720 could expect a drop to between 570-590 and those with a score of 780 could expect a drop to between 620-640. The manner of parting with the property did not seem to affect the average FICO drop, indicating that a short sale is not “better” for a person’s credit score than a foreclosure.

Those secondary credit considerations that some use to justify selling short (like trying to “settle a debt” or “work with the bank”) are not factored into the strict FICO equation. Therefore, short sales and foreclosures are weighed the same – each is a "failure to pay as agreed.”

Giving FICO advice
These results simply reinforce the real estate agent’s duty to manage the client’s expectations and not give financial advice. Short sale listing agents do not exist to give credit advice. Rather, they exist to facilitate the client’s decision to sell short and avoid foreclosure. Whether the client should sell short or strategically default is ultimately a choice that the client must make with his own professional legal and/or financial advisor.

Of course, if advising clients on FICO matters, real estate agents should always disclose that short sales and foreclosures have the same general effect on the client’s FICO score. It is not accurate to say, “a short sale will have a less detrimental effect on your credit score than a foreclosure.”