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Short Sale Affects Credit Score - how many points do you lose?

Author: Jessica Bennet
Community Mentor
Ask Jessica
Posted on: 29th Dec, 2005 11:49am
A Short sale is where the lender agrees to accept an offer for a house that is less than the amount owed on the mortgage. Short sales happen when the owner is behind or about to become behind on their mortgage and want to avoid foreclosure. Moreover, if the home is located in an area where home prices are on a decline, then it may be sold off for less at a price that isn't enough to cover the loan balance.

A short sale is less damaging to your credit score than a foreclosure. Your FICO score will drop by 75-100 points if you do a short sale, compared to 250 if you get a deed-in-lieu.

By attempting a short sale, the borrower can avoid foreclosure and a decrease on their credit score. Moreover, a short sale may be faster and less expensive compared to foreclosure.

How to negotiate for short sale..

In most cases, borrowers are approved for the sale only after they have been in default and the lender has served them with a Notice of Default. At times, the borrower has the option to negotiate a short sale in case he's unable to pay off the loan and intends to move out. In this case, the borrower should provide the lender with a hardship letter stating why he cannot continue to pay his mortgage and why a short sale is the best option for both parties. It's better to take help of a real estate agent or attorney to negotiate a pre-foreclosure sale with the lender's Loss Mitigation Department.

Posted on: 29th Dec, 2005 11:49 am
My credit score is 550 and I am selling a house. I owe 50k and I am looking to do a short sale for 45k should. How does short sale affect credit score.
Hi Rosalyn,

As you're not delinquent on your mortgage payments and as you've some income, there are less chances that you'll be approved for a short sale.

Posted on: 27th Apr, 2011 11:52 pm
I live in Michigan but need to move out of state to deal with sick family members. I have two mortgages, both equaling about 75,000. My neighborhood is in the toilet. The houses next door to me sold for 12,000 and 10,000. I make decent money, and I hav enever had a late payment. I listed my home for two years, and recently I began dropping the price. I have an offer for 38,000 which the bank rejected. If I stop making payments because I really do need to move out of state, do you think it will be approved?
Posted on: 07th Jun, 2011 03:16 pm
Hi JJ,

Though stopping payments is not a good option, but if you stop making payments, there are chances that your lender may be ready to accept your request.
Posted on: 07th Jun, 2011 11:35 pm
My husband and I are separating and neither can afford the house on our own. We are not late on the payments at all at this time. The market value of our house is less than what we owe and even if we could sell it for what we owe we do not have the funds to pay closing costs. Our realtor said a short sale is an option but I am worried about negative effects on my credit. Will it affect our current credit card rates or auto insurance amounts? Is it only affecting being able to purchase another home in the next several years?
Posted on: 17th Jun, 2011 01:49 pm
Hi aimetx!

Welcome to forums!

A short sale will lower your credit score by around 80-100 points. Apart from that, you may not be able to get a mortgage for the next 2-3 years. It may affect your current credit card rates and your auto insurance amounts.

Feel free to ask if you've further queries.

Posted on: 18th Jun, 2011 12:00 am
I own a property in cook county Illinois that is going on foreclosure and I don`t have a job. The only income for now is the rent I still collect from the tenant, my credit score went from 820 to 550, and I have 30K in credit card debts. Is it worth it to try to short sell it and loose the only income or should I just let it go and apply for bankrupcy after the bank takes over the condo. I don`t know what to do and I need help. :(
Posted on: 12th Jul, 2011 05:07 am
hi guest,

if you don't want to save the property, then it will be better if you could contact the lender and apply for a deed in lieu of foreclosure. this will help you in selling off the property and you won't be liable for paying off any deficient balance to the lender. to know more about deed in lieu of foreclosure, check out the given page: .
Posted on: 12th Jul, 2011 11:50 pm
I currently own a home that I am current on the mortgage. But I also have a lot of land that I owe 75,000 but county taxes estimate at 66,000. I recently lost my job and was able to find a renter for my house. But I'm hesitant to use any money I've got in savings to pay my land payment in case I don't find a job right away. The land has been listed for sale since March 2011. Should I go ahead and list the land as a short sale even though there is a chance I might get a job in a couple of weeks. This is the second time that I have listed this lot. Personally, I just wish it would go away. Will the banks accept it as a short sale if I get a job, even a temporary one.
Posted on: 19th Sep, 2011 10:36 pm
Welcome Marilee,

If you want to get rid of the property, then it is better to list the property in the market and contact the lender for a short sale. If you have hardship in paying off the loan though you have a job, the lender will consider your request for a short sale.
Posted on: 20th Sep, 2011 09:46 pm
I want to do a short sale for less than I owe and husband does not want to. My home has water problems that we can not afford fix probably ever.due to water damage it causes mold in our lower level we use as a basement due to water/mold problem. We struggle to pay two mortgages. I figure unload this mess and rent.please tell me what u would do
Posted on: 03rd Oct, 2011 06:44 am
hi sjlo,

short sale is a good option to get rid of the property. however, you can even go for the option of a deed in lieu of foreclosure. this will help you in getting rid of the property and you won't be liable for paying off the deficient balance as it will be forgiven by the lender.

Posted on: 04th Oct, 2011 11:15 pm
Hello, I have 3 investment properties in Las Vegas, all of which are 'upside down' I have renters but the rent does not cover the mortgage so I have negative cash flow every month. I am current on all 3 mortgages. If I do a short sale, what effect will it have on my credit score? In Nevada, can the bank come after me personally for the unpaid balance after the short sale?
Posted on: 04th Nov, 2011 11:32 am
Hi Bruce,

After a short sale, the bank can come after you in order to recover the deficient balance resulting from the sale of the property. If you cannot pay it off, the lender may charge it off to the collection agencies.

Posted on: 04th Nov, 2011 08:20 pm
I am co-signer with my son on this townhouse and was wondering how bad it would hurt my credit if he quick sales it cause he no longer lives in Tallahassee
Posted on: 16th Nov, 2011 02:26 am
Hi john,

As you're a co-signer, a short sale/quick sale will lower your credit score by around 80-100 points. Apart from that, the lender may come after you in order to recover the deficient balance resulting from the property sale. Also, it will remain in your credit report for the next 7 years.

Posted on: 16th Nov, 2011 08:25 pm
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