Basics of a Short Sale

Short sales happen when a lender agrees to accept less than the amount owed against the home because there is not enough equity to sell and pay all costs of sale.

Not all lenders will negotiate a short sale, and that is why a real estate agent is a tremendous help by contacting the lender's loss mitigation department to find out.

You can't just wake up one morning and decide you're going to sell your home at a loss by asking for a short sale. It used to be that lenders wouldn't even consider a short sale if your payments are current, but that has changed.

However, realize that lenders will be more agreeable to negotiation if your payments are in arrears. Plus, if you have cash assets, the lender might try to tap those accounts.

How is MY Credit Affected?

Fair Issac says the average points lost on a FICO score are as follows:

•30 days late: 40 to 110 points

•90 days late: 70 to 135 points

•Short Sale or a very early (under 60 days late) deed-in-lieu: 85 to 160 points

•Bankruptcy: 130 to 240 points

•Foreclosure or (90 days late or more) Deed-in-Lieu of Foreclosure: 200 to 300 points 

Sellers will take a hit  depending on overall condition of credit. This means if YOUR FICO score before foreclosure was 680, it could dip as low as 380 IN A WORST CASE SITUATION.

Some will tell you that the effect of a short sale on a your credit report is identical to that of a foreclosure.

The ding on credit will show up as a pre-foreclosure in redemption status which will result in fewer FICO points lost. THATS GOOD NEWS FOR YOUR FICO SCORE!