Unfortunately, a short sale will negatively affect your credit and will show as a “pre-foreclosure in redemption” on your credit report. Your credit score can drop anywhere from 100 – 200 points for having a short sale reflecting on your credit report. The amount of points your credit will drop also depends on whether you have 30/60/90 day lates showing for the mortgage on your credit report.
Even though a short sale does affect your credit score, a buyer usually can be approved for a new home loan within 18 – 24 months.
Making sure you have the right real estate agent representing you in the sale of your home especially if you are forced into short sale is of the utmost importance! Many real estate agents don’t have the education or knowledge on how to handle a short sale and this can have a negative impact on the sale of your home.
If you are a homeowner and need answers on the short sale process, fill out our contact form and we will have a short sale expert in your area contact you immediately and discuss your options.
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Tony,
It is my understanding that the only way a short sale can affect your credit score is if there have been missed payments. Specifically, “only late payments on mortgages will show and the 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 as brief as 12 to 18 months.” This information was provided to me by the Distressed Property Insitutite. I will forward the information about the blog to Alex Charfen and ask him to weigh in on the conversation.
Jodi,
Here is another article on About.com that pretty much says the same thing.
http://homebuying.about.com/od/4closureshortsales/qt/060907SScredit.htm
Good Article. I’ve done several successful short sales; and I think a large part of the process is educating the consumer.
Kathy, I couldn’t agree more! It’s all about educating the consumer on the process and what to expect!
there are some varying opinions on the effect of the score. they do seem to be just that… opinions… because FICO score algorythm is a proprietary and secret formula. in general though once you have a bunch of lates on your credit report your credit has been damaged allready.
Thanks for this information, nice article. I need information to refinance my home because I read at http://home-refinance-mortgage–loan.blogspot.com/ , the global crisis will make the rates increase, so it’s to hard to apply credit for my home now. can you help me??
Jhon,
Do you have a link to the actual blog post so I can read it?
Hi,
Couple important points:
1) A Short sale and a foreclosure have the SAME initial negative credit hit. Hundreds of points lost off your score.
2) As someone basically stated above..the benefit for a SS over a foreclosure (one of the many benefits) is that someone can buy again AFTER 24 months following a SS…and for Foreclosure its 4 years.
Hope this helps!
Tim and Julie Harris
http://www.AgentShortSaleSecrets.com
http://www.TimandJulieHarris.com