How am I Affected by a Short Sale?
Short Sales usually do not happen quickly, but they may be an foreclosure alternative that provides the best solution for the the homeowners. They also provide multiple benefits.
- The homeowner avoids foreclosure.
- The impact on credit score is not as severe as a foreclosure.
- A short sale is not reflected in public record as is a foreclosure, and many cases it will allow the property owner to avoid a deficiency judgment.
- The borrower may be able to qualify for a new mortgage in as little as 2 years as opposed to at least 5 years in the case of foreclosure.
Below is a quick comparison of the effects of Foreclosures and Short Sales:
| Foreclosure | Short Sale | |
| Credit Report | May lower your score significantly; 250-300 points over 3 years. |
May lower your score with much less impact; possibly as little as 50 to 100 points for a 12 month period |
| Credit History | Will stay as public record for 10 years or more. | Not reported on credit history and is forgiven. |
| Current Employment | Could be a reason for immediate reassignment or termination. | Not reported on the credit report and is not a challenge to employment. |
| Future Employment | Detrimental credit item and might challenge employment. | Not reported on the credit report and is not a challenge to employment. |
| Deficiency Judgment | The bank has a right to pursue a deficiency judgment. | It may be possible to convince the lender not to pursue a deficiency judgment. |
| Future Fannie Mae Loan (Primary Residence) | The homeowner is ineligible for a Fannie Mae underwritten loan for 5 years. | The homeowner is ineligible for 2 years. |
| Future Loan with a Mortgage Company | You will have to answer “yes” to the question “Have you ever had a property foreclosed upon.” This will affect your rate. | You will have no declaration. |
| Amount of Deficiency | Will put the property in a REO process and will result in a lower sales price and a higher deficiency judgement. | A property usually sells closer to market value which generates a lower deficiency judgement if pursued by the lender. |
Short Sales are a challenging process in which a homeowner is best served by contracting with trained real estate to guide the way.
Article written by ResortQuest Realtors Sissy Carroum, Jim Hibbard and Walter Michalke.
For more information about ResortQuest Real Estate’s Distressed Property Sales Division, call 800-846-7962.
What Can the Distressed Properties Division Do For You?
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For Buyers: Information and explanations of the current market climate. | |
For Sellers: Find possible solutions to avoid foreclosure. |
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Commercial Investors: |
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Asset Managers: Services and resources of ResortQuest. |
