What to Do If Credit Report Shows Foreclosure Instead of a Silicon Valley Short Sale

Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194

Credit reports frequently have mistakes. Very often consumers are not aware of these mistakes until they are trying to obtain credit for a large purchase like a home or car.  There is a process for rectifying credit mistakes, but it can take some time.

As more and more short sales are being processed it is only natural that some mistakes are showing up on credit reports, especially since there is no standard way for a credit report to reflect a short sale. The bank may report loan paid as agreed, or loan paid for less than the full amount. Which ever way it is reported it should not say foreclosure. Unfortunately occasionally this will happen, but the fix is easy.  When you sell a home as a short sale you will receive a HUD1 statement. this is a statement that spells out what money came in from the sale and how it was distributed. If a home is foreclosed there is no HUD1 given to the owner.  So, if you have a HUD1 your home was not foreclosed.  You should send the HUD1 to the credit reporting agency along with the statement that since you have a HUD1 you were not foreclosed on. They can then remove the foreclosure from your credit report. 

It is probably a good idea to check your credit report 6 and 12 months after a short sale just to make sure this has not happened.

If you have any questions about short sales please feel free to contact me.

Marcy Moyer CDPE

Keller Williams Realty




D.R.E.  01191194


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2. Marcy Moyer of Keller Williams Realty is not associated with the government, and our service is not approved by the government or your lender; and 
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Posted by

Marcy Moyer eXp Realty of California  Specializing in Probate and Trust Sales, and Rental Investment Properties



Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Sidney Kutchuk 07/10/2011 05:14 PM
  2. D B 07/11/2011 08:59 AM
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Eileen Hsu
Douglas Elliman Real Estate - Manhattan, NY

Staying on top of this type of thing is so essential as your credit score is very important.  This heads up to a specific situation is important to think about.

Jul 10, 2011 02:26 PM #8
Louise Thaxton NMLS 69996
Fairway Independent Mortgage Corp Louisiana NMLS#2289 Equal Housing Lender - Leesville, LA
Military Mtg Specialist - 866-960-9115 VA FHA USDA

Great tip and blog, Marcy!  Many people do not know to do this - thanks for the post!

Jul 10, 2011 03:34 PM #9
Michael Tally

Good info Marcy! I am sure most of us will eventually be asked that question.

Jul 10, 2011 03:58 PM #10
Scott Petersen
Client First, Realtors - Canton, MI - Canton, MI

Good Post. I have been wondering how exactly shorts will be reported to the credit agencies. Saving ones credit is one of the motivating factors of someone shorting a property opposed to allowing it to foreclose. If it is reported incorrectly, the short sale is useless.

Jul 10, 2011 04:47 PM #11
Marcy Moyer
eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales - Mountain View, CA
Probate, Trust, and Investment Specialist

Thanks everyone!

I think because there is no standard way to report a short sale it leaves a lot of room for mistakes.

Jul 10, 2011 05:30 PM #12
John Juarez
The Medford Real Estate Team - Fremont, CA

Good advice, Marcy. Until there is a uniform way of reporting short sales to the credit reporting agencies, our clients will have to follow up and make sure that there reports are correct. I figure that the banks and credit reporting agencies will figure out the proper way to handle short sale just after the market changes and short sales once again become a rare occurrence.  

Jul 10, 2011 08:33 PM #13
Sandy Acevedo
951-290-8588 - Chino Hills, CA
RE/MAX Masters, Inland Empire Homes for Sale

Do you know if they willl rectify the mistake after escrow has closed?      

Jul 10, 2011 10:15 PM #14
Harry F. D'Elia
RentVest - Phoenix, AZ
Investor , Mentor, GRI, Radio, CIPS, REOs, ABR

I see so many consumers hire other people to fix their credit. Why? One can do it themselves. Great point here

Jul 11, 2011 01:09 AM #15
Tni LeBlanc, Realtor®, J.D.
Mint Properties, Lic. #01871795 - Santa Maria, CA
Tenacious Tni (805) 878-9879

Great advice, it is common for credit reports to have mistakes after a short sale.  

I tell my short sale sellers to monitor their credit carefully.

Jul 11, 2011 01:41 AM #16
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Marcy, this is very good advice. This can make a big difference on a credit report. Thanks.

Jul 11, 2011 02:01 AM #17
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Nice little ditty to have and pass around....every little bit helps in these uncertain and ever changing Real Estate times...thank you Marcy

Jul 11, 2011 02:35 AM #18
Elisha Grace
Opportunity Mortgage - Bozeman, MT
Bozeman Montana Loan Officer

This is very good advice for a Realtor to pass around.  As a person in a short sale depends heavily on their Realtor to advise them.  As a lender I would not see that the short sale was reported as a foreclosure until they are ready to purchase another house.  And having the error corrected takes time. 

Jul 11, 2011 03:59 AM #19
Therese Reid
PRIME LENDING - Oconomowoc, WI

Marcy -

I thnk it is always a good idea to stay on top of your credit report as things can be reported incorrectly.   

However, as far as future buying power goes, many new underwriting guides are viewing short sales the same as a foreclosures and/or deed-in-lieu.  This has stopped many a potential buyer in their tracks

Be careful out there - great topic to bring this to light!


Jul 11, 2011 07:59 AM #20
Lloyd Binen
Certified Realty Services - Saratoga, CA
Silicon Valley Realtor since 1976; 408-373-4411


This is good advice for correcting errors is credit reports. Short sales in Palo Alto must be as rare as cows in Berkeley?

Jul 11, 2011 08:43 AM #21
Marcy Moyer
eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales - Mountain View, CA
Probate, Trust, and Investment Specialist

John I bet you are right that this will all become uniform bout 3 months after short sales become rare again.

Lloyd Palo Alto has very few short sales, but they do happen close by.

Sandy if a consumer sees a mistake on their credit report and they report the mistake the reporting agency goes back to the creditor who then has to prove they were right. If there is a HUD1 there is no way they can prove this was a foreclosure and the report has to be changed. This would all happen after escrow has closed.


Jul 11, 2011 05:16 PM #22
Dave Sullivan
Real Estate One - Birmingham, MI
Michigan Realtor with an investor viewpoint

Marcy,  Nice Job it is very important to keep a short sale from being reporting as a Forclosure watch this to find out why.




Jan 20, 2012 12:07 AM #23

Hi Marcy

Good Evening. We executed a short sale on our property back in Mar 2009 and with NO defaults. However, in 2011, the credit bureau updated my wife's account stating that it is a foreclosure and that she was 120-days late on the payment. Both are not true. Currently, we are looking to dispute this and are preparing to send some paperwork. We have the lender's approval letter that we received back in 2009 PLUS the HUD-1 closing which I was told will not be provided if we had defaulted. So, we do have the HUD-1 closing statement as well.

That said, the sad fact is the lender Aurora Loan services is no longer in business. If I send this paperwork, would the credit bureaus go back to Aurora or 'try to' reach them over phone and verify or would they accept the intact paperwork and facilitate a good future for us?

Any insights is much appreciated. Thanks very much in advance.



Jul 19, 2012 11:03 AM #24
Marcy Moyer
eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales - Mountain View, CA
Probate, Trust, and Investment Specialist


If I were in this situation the first thing I would do would be to challenge the credit report. The creditor has some amount of time to respond to the challenge. If they do not respond it is my undertanding that the negative item has to be removed. Aurora is out of business and sold off their loans to Nationstar. If the challenge did not work and Nationstar respondsI would then go to Nationstar and give them your proof. You will probably have to show the proof to the credit reporting agency and if Nationstar repsonds they may get the info from the credit bureau. I would be surprised though if Nationstar would have anything to do with the loans that have already been closed, but I do not know what kind of agreement they reached. Good luck!

Jul 19, 2012 11:15 AM #25

Thanks a Lot, Marcy. Glad to hear your quick response.

Yes, I am getting all the paperwork ready to go out and dispute the entry. I am providing them with the HUD-1 closing statement which I understand is one of the crux to prove NO defaults. As for NationStar - I would like to mention it here for the benefit of other readers who might be in a similar situation... We called them and provided the loan # that Aurora provided since after their initial debacle. Like you said, there is no entry on their system it appears (per the representative who spoke to us). That said, we called MERS to find out who is servicing Aurora loans other than nationstar and used our MERS servicer ID - They have pointed to an agency that I cannot recollect the name top of my head... I am going to have to call them and find out tomorrow.

In the meantime, I am hoping for my postal mail and FAX of the same set of documents to the credit bureaus help us get out of this major error. I will keep you posted. Once again, much appreciate the quick response. It means a lot to us :)



Jul 19, 2012 02:16 PM #26
Brian DeYoung
Howard Hanna Real Estate Services - Ithaca, NY
Brian DeYoung

is a silicin vallet short sale a special bnrand of short sale?

or is that an seo trick? in any case, the information is good, and your expertise is appreciatted.

Aug 20, 2013 06:12 AM #27
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