Will A Short Sale Affect My Credit If I Don't Miss Any Payments?

By
Real Estate Broker/Owner with Tutas Towne Realty, Inc and Garden Views Realty, LLC BK607690

Credit scoring is one of the great mysteries of the universe.  The only ones that know how it fully works are the ones doing the scoring. And they ain't telling!


We do know that they take into consideration:


  • Payment history

  • Debt to income

  • Available credit


Missing payments will affect payment history and the Short Sale itself will affect debt to income and how the loan is settled. Not missing payments will help but still a Short Sale is a deragatory event for your credit.


Short Sales have always affected credit scoring about the same as a foreclosure or deed in lieu. the difference is that it doesn't show up as a foreclosure. It normally gets reported as "settled for less than owed" or something similar.


The main incentive for sellers to do a Short Sale is that they can have some control over what happens to the deficiency and how it is handled. In Florida a deficiency judgment is almost automatic with a foreclosure. with a short sale we can negotiate a waiver of the lender's deficiency rights. This is a HUGE difference.


 

The Seller can also have some control over when they have to move instead of just being kicked out once the foreclosure goes through.


 

A Short Sale is being proactive and solving a problem.  A foreclosure is playing the victim. Don't be a victim.

 

 

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 Tutas Towne Realty, Inc handles Florida real estate sales, Florida short sales, Florida strategic short sales, Florida pre-foreclosure sales, Florida foreclosures in Kissimmee Florida Short Sales, Davenport Florida Short Sales, Haines City Florida Short Sales, Poinciana Florida Short Sales, Solivita Florida Short Sales,  Orlando Florida Short Sales, Celebration Florida Short Sales, Windermere Florida Short Sales. Serving all of Polk, Osceola and Orange Counties Florida. Florida Short Sale Broker. Short Sale Florida.

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Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Erica Ramus 11/24/2012 03:59 AM
  2. Debbie Cook 11/24/2012 10:14 PM
  3. Mark Loewenberg 11/24/2012 10:51 PM
  4. Gabe Sanders 11/25/2012 07:39 PM
Topic:
ActiveRain Community
Location:
Florida Polk County Poinciana
Tags:
credit score
faq

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Show All Comments
Ambassador
3,673,547
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Bryant, the being in control vs. being a victim is the best reason of all to go the short sale route. 

Nov 24, 2012 08:48 AM #12
Rainmaker
227,577
Debi Braulik
www.roundrealestate.com - Maple Valley, WA
Selling Maple Valley to Fife WA Homes For Sale

Great information for home sellers in Florida. 

Nov 24, 2012 09:55 AM #13
Rainmaker
1,079,273
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL
Bryant, love the analogy of being in control vs the victim. People don't think about it from that angle. Sharon
Nov 24, 2012 09:57 AM #14
Rainer
295,058
Brian Morgenweck
Power Realty Group, LLC Bergen County, NJ - Hackensack, NJ
Broker/Owner, GRI, CRS, ABR, SRS

Pro-active is better, indeed.

Credit scores are like Google algorythms. What the FICA they thinking?! (Sorry...had to!)

All the best, BB!

Nov 24, 2012 10:07 AM #15
Rainmaker
2,480,264
Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

Great advice, Bryant!  And, I understand that no 2 short-sales will affect credit the same. 

Nov 24, 2012 11:44 AM #16
Rainmaker
318,971
Tamara Inzunza
RE/MAX Executives - Alexandria, VA
Close-In Alexandria and Arlington Living

Awesome BB, I couldn't have said it better myself!  Congrats on the feature and I hope you had a great Thanksgiving :-)

Nov 24, 2012 12:03 PM #17
Ambassador
2,007,377
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M
BB - Wouldn't it be nice to truly understand credit scoring? Still, not having the lates should help some.
Nov 24, 2012 12:30 PM #18
Rainmaker
362,407
Lynn Pineda
eXp Realty - Boca Raton, FL
Real Estate Promises delivered in SE Florida

Well put Bryant. So many factors to consider in how it all affects your credit, no doubt. And you're right the deficiency IS a HUGE Difference!

Nov 24, 2012 01:54 PM #19
Ambassador
4,298,326
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Bryant, distressed home owners must know that they are already in trouble - so credit history will be affected for sure....

No matter what...."Short Sale is a deragatory event for your credit."

Nov 24, 2012 02:42 PM #20
Rainmaker
438,065
Debbie Cook
Long & Foster Real Estate, Inc - Silver Spring, MD
Silver Spring and Takoma Park Maryland Real Estate

Thanks,
Good info that I certainly did not know - Makes a lot of sense

Nov 24, 2012 10:09 PM #21
Rainmaker
2,710,342
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Bryant - Thank you for sharing detailed information about will a short sale will affect my credit if I don't mis any payment.

Nov 25, 2012 01:17 AM #22
Rainmaker
917,438
Ginger Harper
Coldwell Banker Sea Coast Advantage - Southport, NC
Your Southport~Oak Island Agent~Brunswick County!

Usually you can not go into a short sale with out being in default..

Nov 25, 2012 06:52 AM #23
Rainmaker
1,304,395
Charles Stallions Property Manager
Charles Stallions Real Estate Services - Pace, FL
Pensacola, Pace & Gulf Breeze Property Management

I always thought you had to be in default but you would know. I am amazed though of the people that let their house go and then want to run out and buy another right away

Nov 25, 2012 07:19 AM #24
Rainmaker
307,574
Pam Graham
All Real Estate Options - Jacksonville, FL
Jacksonville, Clay & St Johns Counties

You never sugar coat anything do ya BB? :) I know sometimes, for sellers they are ready to just be over with their short sale and just want it to go back to the bank just to be done. If they hang in there tho, it can be worth it at the end to have the deficiency judgment waived or reduced.

Nov 25, 2012 08:15 AM #25
Rainmaker
888,138
Gail Robinson
William Raveis Real Estate - Southport, CT
CRS, GRI, e-PRO Fairfield County, CT

Sometimes a foreclosure is a better choice than a short sale, it really depends upon the situation.  If someone is going through a bankrupcty at the same time, then there is no deficiency judgment as the mortgage is another debt that can be discharged.  I recommend to clients that they talk to a bankruptcy attorney and a tax accountant before deciding whether a short sale or foreclosure is the best option for them.  Depending upon the state, someone in foreclosure may be out of their home involuntarily in months or it could take several years (about 4 years in New York, a judicial foreclosure state).

Nov 25, 2012 09:11 AM #26
Rainmaker
4,796,557
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Great info Bryant.  This question has been coming up a lot of late.

Nov 25, 2012 07:38 PM #27
Rainmaker
1,506,889
Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Fifteen Years Experience in Brevard County

The biggest thing to avoid is the deficiency. Like you say...the short sale gives one a chance to control the outcome more than a foreclosure.

Nov 25, 2012 09:45 PM #28
Rainmaker
2,189,295
Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

Most people who fall behind face 2 options: They can either tell the bank what to do or they can do what the bank tells them to do. They can take charge and be in control, or they can throw their hands up in the air and let the bank do whatever it wants.

Nov 26, 2012 01:29 AM #29
Rainmaker
1,142,035
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Hi guys. Both Fannie and Freddie will now approve short sales when the borrower is current on payments. It just needs to be one of their approved hardships. As of 1 November 2012:

  • Enable servicers to quickly and easily qualify certain borrowers who are current on their mortgages for short sales: Common reasons for borrower hardship are death, divorce, disability, and distant employment transfer or relocation. With the program changes, servicers will be permitted to process short sales for borrowers with these hardships without any additional approval from Fannie Mae or Freddie Mac, even if the borrowers are current on their mortgage payments. Borrowers will now qualify for a short sale if they need to relocate more than 50 miles from their home for a job transfer or new employment opportunity

BK will eliminate the debt but the lender will still have to foreclose to get the property back. So now you end up with a foreclosure and a BK on your credit. This is more difficult to recoup from than just a short sale. There may be cases where a foreclosure is better I just have never heard of one.

Negotiating a short sale with full waiver of deficiency is just not that difficult anymore. Why leave things to chance?

Nov 26, 2012 04:21 AM #30
Rainmaker
1,142,035
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Fannie Mae and Freddie Mac will waive the right to pursue deficiency
judgments in exchange for a financial contribution when a borrower has
sufficient income or assets to make cash contributions or sign promissory
notes: Servicers will evaluate borrowers for additional capacity to cover the shortfall
between the outstanding loan balance and the property sales price as part of approving

Nov 26, 2012 04:23 AM #31
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