HOW DISTRESSED PROPERTIES AFFECT YOUR CREDIT

If your house is for sale, if you need to sell your house, or your house has become a distressed property you might be interested in whether doing a short sale would affect your credit less than completing a foreclosure. Read on to learn more about your options.

Short Sale Basics

A short sale is when you sell your house for sale for an amount less than the mortgage that is owed and the lender agrees to accept less because there is enough equity to sell and pay all costs of sale.

In order for a short sale to be approved you have to have a buyer that has put an offer in. If you need a buyer contact www.WeBuyAllHomesCash.com. They are a group of professional home buyers that specialize in distressed properties.

Not long ago lenders wouldn't even consider a short sale if your payments are current, but that has changed. Lenders will see it as more necessary if your payments are in arrears. Be prepared if you have cash assets, the lender might try to tap those accounts.

How will my credit be affected if I sell my house as a short sale?

There is no doubt that if you sell your house via short sale or if you allow it be foreclosed it will affect your credit score in a negative way.

The text book answer for how much going through foreclosure or giving the lender a deed-in-lieu of foreclosure will affect your credit score is: (based on 30 days in arrears)

Foreclosure or Deed-in-Lieu of Foreclosure:

Sellers can expect to see a drop of 200 to 300 points, depending on overall condition of credit. There is a 5 year recovery period if your house is foreclosed.
Short Sale:

A short sale will show on your credit report as a pre-foreclosure in redemption status. The affect on your credit score varies significantly based on how far behind your payments are and your overall credit status. If you are not in arrears or are 30 day behind on payments it can be as little as 50 points. If you are 5 months behind on payments it can be the same as foreclosure. The recovery period for a short sale is usually within 24 months. Every seller's situation varies.