Special offer

More on Short Sales and Credit Scores

By
Real Estate Broker/Owner with Broadpoint Properties Cal BRE #01324959

 

Do you remember this Tootsie Roll commercial from a few years ago? The boy in the commercial is curious as to how many licks it takes to get to the center of a Tootsie Roll lollipop? Check it out:

 

This blast from the past reminds me quite a little bit of a question that I get often about how a short sale impacts a seller’s credit. Short sale sellers frequently are curious about how their credit will be impacted by a short sale. In fact, recently one short sale seller asked me whether we might be able to pay the bank a little bit extra in exchange for a clear bill of health on the credit report.

It’s hard to know in advance what the impact will be on the seller’s credit of a short sale. Each situation is unique and each seller has a different set of circumstances. Some short sale sellers are still making payments on their mortgage because they can afford to do so. Others have lost their jobs and are having trouble making ends meet.

Just like the voiceover in the commercial that says “the world will never know”, it’s hard to know in advance what the result of the short sale negotiations will be. But what we can say is this: late payments have a significant impact on the credit score. A seller who is current on payments and participates in a short sale will not see the impact on credit in the same way as a seller who has missed eight mortgage payments on two different loans. 

These three articles also contain helpful downloadable information about short sales and credit. So, if you want more concrete information about short sales and the future ability to borrow, check ‘em out: 

Short Sale vs. Foreclosure

Future Ability to Borrow

Short Sales and Other Derogatory Credit Events

 

 

Comments(5)

Brigita McKelvie, Associate Broker
Cindy Stys Equestrian and Country Properties, Ltd. - Lehigh Valley, PA
The Broker with horse sense and no horsing around

Melissa,

There are so many different things that impact credit scores.  One thing I can say is that foreclosures will impact the credit scores more than a short sale will.

Brigita

Jun 22, 2011 02:19 AM
Sussie Sutton
David Tracy Real Estate - Houston, TX
David Tracy Real Estate for Buyers & Sellers

This information is good to know in case a client will ask me any questions...

Jun 22, 2011 03:19 AM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Melissa. I think all of my short sale sellers have asked me this question. I've had some ask me how long before they can another a house. Of course when I ask about their situation they haven't made a mtg payment in 2 years and filed BK last year. I guess they figure doing the short sale will INCREASE their credit score. LOL!!

Credit scoring is one of the mysteries of the unniverse.

Jun 22, 2011 04:21 AM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Melissa, great information for sellers contemplating doing a short sale!    They do vary depending on seller's situation, and each bank has different rules.

Jun 23, 2011 02:19 AM
Todd Clark - Retired
eXp Realty LLC - Tigard, OR
Principle Broker Oregon

I wish there was a real answer to how many licks it takes to get to the center of a short sale. But, if someone wants to take my short sales and find out, I just may let them.




Jun 25, 2011 04:19 AM