Short Sale Affect on Credit Report

To some lenders, a short sale looks better than a foreclosure, but it may still leave an impact on your credit report.   The consequences of selling your home this way may not be as long-lasting as a foreclosure, but there may still be some damage.

Every situation is unique so the impact will vary based on individual factors.  In my opinion a short sale is still the best option to avoid foreclosure.

Since in most cases, one of the short sale qualifications requires a homeowner to have missed payments or be behind on mortgage payments, the credit damage actually starts before the short sale is even completed.   After it’s over and done with, a short sale can have an affect on your credit report and could possibly reduce your credit score.

According to Elizabeth Weintraub, “The ding on credit will show up as a pre-foreclosure in redemption status, which will result in a loss of 200 to 300 points.” (About.com)

A short sale on your credit report still says that you lost a home, but it also shows that you did everything you could to keep the home from foreclosing.  The impact will not be as great as a foreclosure,  –  a foreclosure on your credit report can affect employment.  Some employers check the credit reports of candidates who are applying for sensitive positions and a foreclosure could potentially keep you from getting hired.

So this type of sale is not necessarily a way to repair credit, but it is the best option if your circumstances have changed and you need to be relieved of the debt incurred by home-ownership.  If the sale is completed under the HAFA, or Home Affordable Foreclosure Alternative program, you’ll no longer be responsible for the remaining balance of the mortgage loan and depending on your financial situation, a short sale affect on credit may be minimal.  Late payments are the big factor which you will have with your credit report, however short sales at this time are easier on your credit report than foreclosure.

Disclaimer: This information is provided for information purposes only.  You should always seek independent counsel such as certified plublic accountant and or real estate attorney pertaining to sale of your home, your credit report, land and or real property in the matters of state and federal taxes and legal issues.

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