Story Comments

niitesh

Late payments effect the credit scores immensely and the short sale is just as bad for if the lender reports it as settlement the impact is just about the same.

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azbroker

Unless this was written by a lawyer for a specific state I would not publish this as good information for everyone. Also of now this article has no reliable information for anyone.
Even the non deficiency states can sue after foreclosure if the loan was a HELOC or even if the 1st was a refi with cash out. Not all loans are the same, not all borrower's situation is the same even in NON deficiency states.
Fannie Mae guidelines state that a borrower with a short sale on records can get another loan in 2 years providing their scores have increased as opposed to 7 with a foreclosure.
Please do more research before you write this or make is state specific. ps AZ is also a non deficiency state however people have had their funds deposited in the bank garnished and wages garnished because of bad advice and choosing to foreclose on homes with heloc's as seconds.
We Realtors do a lot of research, training and work with lawyers to provide the best solution for clients.
...(Read more of this comment)> What you're suggesting here is that people do foreclosures as their best option ? !(Show less of this comment)

j-gar

Typically the reporting is "paid as agreed for less than the amount owed" with a zero balance. FICO, I am sure, will confirm that when your home is in default - 60-90 days past due, the score is the same regardless of the outcome whether it is resolved with a bank repossion or a workout program such as a loan modification or short sale. The significance is in the recovery time. A short sale is not reported as either charge off or a settlement. This reporting is for debts that are unrecoverable and the effects of either of these is not even close to equal to a foreclosure. Short sale real estate agents work very hard for a discounted income. A typical short sale can take 40-60 hours just in phone time, and except for FNMA products, the bank will not pay full commissions. Additionally, the standard closing time is between 4-7 months and has an average of 3 buyers that cancel due to the extensive time it takes to get answers from the bank.

Be careful where you get your informat...(Read more of this comment)ion. There are a lot of misinformed but well meaning individuals out there that think that they get it. Ask around and see if you can get someone to show you a before and after credit report for both short sales and foreclsures. Talk to an attorney. Make sure that you don't rely on one source because that source almost certainly has limited experience. Remember, a few years ago short sales were a strange concept. Today they are mainstream and a necessary evil for both banks and strapped homeowners. Hope this is helpful! :) (Show less of this comment)

j-gar

Your credit score is lowered by late payments - if the account is current, and yes, short sales are approved without being in default, there is a much smaller impact on credit score than foreclosure. Some report no impact. However, keep in mind that a short sale may prevent a new mortgage approval for a period of time regardless of credit score. The assumption in this article, I expect, is that the seller stopped making payments in order to facilitate short sale.