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Is a short sale owner's credit affected?

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Real Estate Agent with Corona Real Estate
I have heard from a local lender that a home owner accepting a short sale will face the same credit penalty as allowing the property to go to auction.  This seems to be counterintuitive, I have always assumed the home owner might take a hit on their credit but not as much as letting the property go.  Otherwise what is their motivation to allow a short sale?  Does anyone have any concrete answers?  Thanks.

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Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes
We understand that they will take a hit but it won't be as many points as a foreclosure. But will be interested to see what someone who is in mortgage has to say about this and knows more.
Dec 16, 2007 02:08 PM
Armando Rodriguez
QUEST REALTY SERVICES - Orlando, FL
Orlando Homes 4 Sale, Real Estate Broker-GRI
Most short sale candidates have missed several mortgage payments. That in and of itself will affect your credit.
Dec 16, 2007 02:10 PM
Kim Wilbourn
Kim Wilbourn Realty - Scottsboro, AL
Your Local Alabama REALTOR
I heard that this still does affect their credit.
Dec 16, 2007 02:14 PM
Brian LeBars
Vintage Mortgage Group - Pleasanton, CA

Not only is the credit affected; they also face significant tax consequences as well.

Dec 16, 2007 02:14 PM
Max de Vries
Intero Real Estate Services - Livermore, CA
I actually know the answer for CA. With a short sale you drop approxiametly 200 points and it takes 2 to 3 years to recover. With an auction it drops 400 to 500 points and take 4 to 5 yeard to recover
Dec 16, 2007 02:24 PM
Josh Austin
Corona Real Estate - Star, ID
Thank you Max.  That makes more sense.  Is it a state by state condition?
Dec 16, 2007 02:26 PM
Carol Culkin, ReeceNichols
ReeceNichols Real Estate - Overland Park, KS
Overland Park Residential Real Estate
I understand the same as others who have commented - they take a hit but not the same as foreclosure AND face tax consequences.
Dec 16, 2007 02:46 PM
Brian Schulman
Coldwell Banker Residential Brokerage, Lancaster PA - Lancaster, PA
Lancaster County PA RealEstate Expert 717-951-5552
I wouldn't think it's a state by state situation.  The FICO scores are proprietary, but national.  I would imagine that the demerits come less from the short sale itself than from the deficiency judgment.
Dec 16, 2007 02:57 PM
Erin Stumpf (Attardi)
Coldwell Banker - Sacramento, CA
916-342-1372 / DRE# 01706589 Sacramento, CA
I wish I had a real answer for you...short sales take place before and during the foreclosure process.  I suppose someone who has missed only one payment before selling a property in a short sale woudl have less affected credit than someone who missed 6 payments...
Dec 16, 2007 03:02 PM
Jen Hudson
Windermere Real Estate/M2, LLC - Stanwood, WA
Stanwood, Camano & Arlington, WA
Max is right. Short sales do affect your credit score, but by about half the points and you can then think about buying a home again in a couple years.  Foreclosures are a much larger hit and you'll be renting for years down the road.  I am almost certain this is a nationwide situation and doesn't vary within states, because your credit score follows you everywhere.
Dec 30, 2007 12:29 PM
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