Short Sale & Credit – The Repercussions of a Short Sale & Credit

Mortgage and Lending with Piney Ridge Properties LLC

One of the first questions I get asked from short sale sellers is how a short sale will affect their credit report. While I understand their concern, it is important to help them understand that the short sale itself isn’t necessarily what may damage their credit score. When the dust settles, their credit score will be a culmination of many variables. Yes, the decision to short sale their house affects their credit score but so will any of the options available to them. In regard to mitigating the damage that a short sale will have on their credit report, you may want to convey the following key points to your seller.

It Is a Train Wreck Bound to Happen

I begin the analogy of a train wreck and let the seller know that the collision is going to happen and that their job now is to control the damage. Going forward, it is prudent for the seller to immediately find help in repairing the negative aspects of their credit report. Tell them to do their homework and use a respected company.

One key point that sellers often forget about is the negative reporting each month leading up to the transaction closing date. Every month they miss a payment is being reported as such by their lender. This should be conveyed to a seller and should motivate them to move quickly in their decisions to manage credit damage.

Lender’s seeking deficiency judgments can add to short sale credit damage. A judgment on a credit report will last years after the debt was settled and the transaction finalized. Sellers should really consider negotiating a settlement with no deficiency sought.

Ultimately the lender’s reporting of the short sale bears the most weight of the damage to a seller’s credit report. Some sellers that I’ve worked with have told me that their lender reported the transaction as a foreclosure and some were reported as settled debt. Again, the best course of action might be finding a credit repair specialist to help sort through the aftermath after the sale.

If you want to find out how to handle other common questions that sellers may ask during your presentation, we've recorded several tutorial videos that we think you'll find extremely valuable to your business. To watch the videos, click here or simply visit

To your success,

Mike Bridges




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Rodney Mason
On Q Financial - Atlanta, GA
FHA 203(k) & HomeStyle Renovation-AL,FL,GA,TN

A short sale is definitely going to impact a seller's credit score.  The severity of their delinquencies will have the greatest impact.

Dec 03, 2010 02:26 PM #1
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