Short Sale and Credit Score Consequences

**agentsranking** · 11-06-2008, 05:39 AM

With all of the short sales in the market I've been receiving the following questions from clients and I'm wondering what other people are seeing.

1) How will a short sale affect my credit?
2) How will a short sale affect my credit differently than a foreclosure?
3) If I am current on my mortgage payments and the bank decides to accept a short sale sale how will this affect my credit?
4) How quickly after a short sale will I be able to qualify for a new mortgage?

**minnesota-mls** · 11-07-2008, 10:16 AM

There are certainly alot of short sales here in Minnesota as well. And our team has been fortunate enough to help a number of clients over the last few years short sell their properties.

Generally when a seller needs to short sale, he or she is already behind on payments and so their credit is not good.

We always recommend our clients talk to an attorney as well as a top CPA to find out the legal and tax consequences on the entire short sale process....

**BeyondThePen** · 11-09-2008, 05:12 PM

I've gotta agree with previous poster. If you go with a short sale, then you've already missed a few payments and your credit is likely in thetank anyway. The last thing a person should be worried about is when they can get a new mortgage.

My understanding is that a short sale isn't far off from hitting your credit like a foreclosure.

You really want to contact a credit expert, though. I would recommend Patrick Ritchie of www.TheCreditRoadMap.com - I edited his book and he's really great at putting all the credit info into layperson's terms. And I know he teaches a class to REALTORS on short sales as well...so he knows the ins and outs of those.

**clemy** · 11-11-2008, 05:50 AM

4) How quick?

Well as a starter I would say the first hurdle is saving up a 20% down payment. They won't be getting a 100% loan, that's for sure.

**agentsranking** · 11-11-2008, 06:24 AM

Based on my recent experience with short sales I would disagree with some of the previous posts regarding the sellers timely payments on their loan. I've seen some banks accepting short sales recently where the home owner is current on their payments. So to clarify the borrower is 100% current on their payments yet the bank accepts a short sale; how will this affect their credit.

**White Bear Lake MN Homes** · 08-22-2010, 06:17 PM

Originally Posted by minnesota-mls

There are certainly alot of short sales here in Minnesota as well. And our team has been fortunate enough to help a number of clients over the last few years short sell their properties.

Generally when a seller needs to short sale, he or she is already behind on payments and so their credit is not good.

We always recommend our clients talk to an attorney as well as a top CPA to find out the legal and tax consequences on the entire short sale process....

I agree with minnesota-mls here. The tax consequences may vary from person to person based on number of payments missed, credit history, income level, etc. So it is safest and best to always recommend that your clients consult an attorney and a CPA about their specific situation. Great post!