So how does a short sale affect your credit anyway? Working as a short sale specialist this is a question that I hear often. And with good reason, having good credit is very important and can directly impact your lifestyle. The truth is that having a short sale on your credit will have a lot less of an impact on your credit score than a foreclosure will…by far. However, it must be done correctly.
A short sale is when a lender agrees to accept less than the full payoff amount because the house isn’t worth what’s owed on the mortgage. Lenders agree to a short sale as opposed to foreclosing because of the time and expense involved with taking a property through the foreclosure process. For a lender to take a property through the foreclosure process they have to hire an attorney to represent them from start to finish which can sometimes cost tens of thousands of dollars. On top of that, taking a property to foreclosure will take up to a year on the average, and the longer their money is tied up, the more money they will lose.
Some of our past short sale clients have reported their score dropping only be 100 points or so which is about the same impact on your credit score as having some delinquent credit cards with their credit. This can be cleaned up by any good credit repair company. The biggest advantage of a doing short sale as is that you will be able to qualify to buy another home within three years as opposed to five to seven years after a foreclosure sale.
In order to find out exactly what the consequences are with a short sale, you should get advice from a licensed short sale expert. This is a realtor that deals with short sales on a day-to-day basis and has closed more deals than they can remember. By finding out what your options are, you can determine what course of action you should take moving forward. Also, a good short sale realtor can be of invaluable help to by negotiating with your lender on your behalf.
It’s extremely important that if your request is approved, make sure that your realtor asks your lender to report the short sale as “paid in full,” as part of the negotiation.
If you’re in need of doing a short sale on your home, talk to an real estate agent experienced in short sales to see if a short sale is the right option for you.
This article was written by John Conde, Orlando realtor, short sale expert.