HOW SHORT SALES AFFECT YOUR CREDIT

                We’re often asked, “What is the effect on my credit rating if my home is a short sale?”  The answer:  “It depends.”
                When a seller sells his home in a short sale, the only credit note regarding the loans would be something like:  “Paid in full, settled for less than the full amount.”  That typically has little to no effect on a credit score.  In most cases, however, the seller has missed payments on those loans.  They will show as “30 days . . . .120 days . . . late”, which will have a dramatic effect on a credit score.  We had one client who continued making payments until the completion of his short sale.  His credit score dropped fewer than 50 points.
                Of course most people doing a short sale do miss payments, and their credit scores dropped a substantial amount.  Even these sellers can quickly raise their scores to excellent levels in 2-3 years by careful use of their credit.
                One other important point.  After a short sale, a seller can typically repurchase with 20% down in 2 years, and with FHA financing (3.5% down) in 3 years with their improved credit.
                As you can see, a short sale should not be seen as an end, but as a tool for a new beginning.  Many of our clients have been able to purchase a better property for a much lower price and have lower payments 2-3 years after a short sale