Please read the important information in this blog post

Mon Jul 7 2008, 06:56

Briefly, yes a short sale affects your credit. IF the bank approves the short sale and it does not sell, then your home goes to foreclosure and your credit is basically ruined for many years. A short sale can keep you from buying a new home as it is a credit ding, nothing as bad as the foreclosure though.

Can you rent this home out til market conditions improve? We have advised many people recently to wait out the market.

Fri Jul 4 2008, 13:46

Please understand that the Realtor does not conduct any transaction for free. If you are truly in a short sale condition, you will have to write a hardship letter to the current bank or mortgage institution maintaining your existing loan. The bank or other interested third party will have to approve the short sale to an interested buyer. When the ok is give to the sale, the new lender processes the loan, and the current bank usually conducts the title examinations. Once all parties have agreed to termsin writing, then the purchase and sale agreement becomes a binding and enforceable contract. What doe this mean to you? A short sale requires that the current banking institution has to write down your debt relative to this sale. The bank will examine your current financial condition, and to the extent that you can bring cash to the table from other resource, you will be asked to do so. If you do not have additional resources, then the bank will have to write off the amount that you are "short." In general, the bank will pay the realtor commissions and fees, but will try to negotiated the commission. Most realtors are smart enough to hold firm,because, they did not cause this situation regarding your ability to pay the note. You will receive a HUD from the lending institution, which details the transaction costs. The bank may try to get you to sign a promissory note, for the remainder of the funds, if you have the ability to pay. You will receive a hit on your credit score either way, because other lending institutions need to know about your ability to pay off any transaction.

Fri Jul 4 2008, 12:36

Kim, I suspect that when you say "short sale", you mean when you sell your home, you are going to be "short" in paying your Realtor and paying off your loan...Normally, a short sale is something different and yes a short sale would affect your credit, just like a foreclosure. If you are simply "short" the money you now owe, if you pay it (set up a payment plan with whomever you owe it to) then your credit will be fine. If you are never late on bills (including your mortgage) then your credit should be fine.

Sat May 17 2008, 19:06

Sorry. I could not pass this one up. I never cease to be amazed at how naive the public can be when it comes to "GETTING SOMETHING FOR NOTHING". If it is too good to be true, it is. Nothing has changed. Our country is in a huge mess because the mortgage industry sold people on the idea they could pay nothing or little down and buy a home without risk. These folks then paid more for these loans in closing costs and on-going interest thinking they were "getting something for free". It does not take a rocket scientist to understand that a GOOD DEAL may not be that at all. I refused to work with clients who insisted that this was a good deal and NOW -- at least – sadly, I can say I was not part of the disaster these folks are now personally facing. And, I don't feel sorry for a majority of these people because NOW they want more of what they were trying to get in the first place. They want to get out of a mortgage without paying a price and/or penalty. Whether you are involved in a short sale or a foreclosure, the end result will probably be the same with FEW if any exceptions. It will NEGATIVELY affect your credit rating for years. How does one justify that someone else should pay for our mistakes? You will pay dearly for a foreclosure or short sale. A simple search on the INTERNET will prove this point. Try this article: http://homebuying.about.com/od/4closureshortsales/qt/060907S…

Good luck.

Sat May 17 2008, 17:49

If you're only going to be short the Realtor's fee and a few thousand dollars, don't consider a short sale. In fact, from what you've said I don't even think you'd qualify for a short sale. You've had good credit and aren't late on bills. Presumably you're not late on your mortgage. I don't know of any lenders who'd classify your situation as a hardship case meriting a short sale.

Don't misunderstand: I'm sympathetic to your situation. It's just that you probably wouldn't qualify for a short sale. And if you did somehow manage to accomplish one, why so badly cripple your credit? It just doesn't make sense.

Check with a financial planner for some strategies. But here are a few to consider: Look for a Realtor who is willing to defer part of his/her commission. Or who will lend you their commission. Not all will be willing or able to do it. But some will. The first house I bought, the Realtor loaned us her commission. It was a second mortgage on the property, which we dutifully repaid over time.

As for the "few thousand" extra--can you scrape that up from anywhere? Friends? Relatives? Don't blow your credit over a few thousand dollars.

And, yes, a short sale will affect your ability to get a new home. It'll affect it severely.

And not only will it affect your ability to buy a new home, but it'll affect all of your other credit transactions. Credit cards. New car purchases. Store-issued credit cards. Even your ability to set up your utility payments (electric, phone, etc.) when you move.

Hope that helps.

Sat May 17 2008, 17:18

From what I have seen, this will probably affect your credit by 80-100 pts. Depending on your credit now, this could affect your future purchase. Usually, you can purchase again in about 18 mos. You should seek legal and tax advice on this, the bank could seek a deficiency judgement on the difference. TRY TO GET THE BANK TO RELEASE YOU IN WRITING.

Sat May 17 2008, 15:02