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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.
How much will my credit get hit for a short sale that we never were late on the payment? We currently are over 800 for our scores
Posted on: 26th Apr, 2013 09:30 am
Hi maggiemay,

You credit scores may get lowered by around 80-100 points after a short sale.

Posted on: 28th Apr, 2013 11:25 pm
How long does a lieu in deed of forclosure takes to be completed, amd how long will the borrower have to move out of the home.
Posted on: 10th Jun, 2013 11:28 pm
hi owesomebody,

the whole process of deed in lieu of foreclosure may take around 90 days to complete. in many cases, the time even gets exceeded. the borrower will receive an eviction notice which will mentioned the time period to move out of the home.
Posted on: 11th Jun, 2013 11:25 pm
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