How Does a Short Sale Affect My Credit?

Many people think a short sale will not affect their credit. There are factors with a short sale to consider which are negative and positive.

A short sale is definitely not a foreclosure. When you perform a short sale, you sell your property below the amount of money you owe on the mortgage loan. The bank approves the sale to occur because they want to get anything they can for a property rather than risk getting much less at the auction. You don’t want a foreclosure on your credit so you would rather do a short sale.

When you sell your property prior to a foreclosure auction and there is thousands of dollars in difference of what you owed on the mortgage note, the bank will not come after you for the difference. You don’t pay the difference to the bank. Your credit report shows a short sale. You will be required to claim the excess amount of money in your taxes as income. You will have to pay taxes on this income and that is it.

A short sale still appears as a home you lost to creditors. However, it also shows creditors you did what you could to save it from going into foreclosure. A short sale doesn’t necessarily look good but it doesn’t look as bad as a foreclosure does on a credit report.

Many people don’t understand that a short sale on your credit does show that you have lost a home. Even though you didn’t foreclose on the home and you don’t have thousands of dollars charged off in your name, it is still a loss on an account. A home loan is a big commitment of thousands of dollars. A short sale shows that something happened and you had to get rid of the property. Some lenders views a short sale in a negative light while others will commend you for saving the problem. It depends on the lender.

If you are facing foreclosure and you want to save your credit one thing you can do is sell your home in a short sale. Ask your bank if they will allow you to sell the property for less than what you owe. Chances are good the bank will allow you to and you will not have a foreclosure on your credit. Be sure you pay the taxes on the difference the next tax filing year.

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How Does a Short Sale Affect My Credit?

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