Foreclosure in California>Question Details

Ron, Home Seller in California

HOw will a short sale affect my credit rating. I have never missed a payment

Asked by Ron, California Fri May 2, 2008

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Lots of confused answers here ...



You have everything from infomercials that declare .. ""short steps to short sales, speedy and safe by spring" ... Or, misinformed statements like .. "Selling a home as a short sale will have a negative effect on your credit, but not as badly as a foreclosure or bankruptcy..."

Thats just not true .. and far from it.

It's not the "short sale" in itself .. it's how the short sale effects your standing credit - before, during and after it happens.

Every creditor you have, JC Penney, Visa, MC, AMEX, the loan on your car, etc ... any of the creditors that are sitting on your credit report as we speak, get affected.

Every creditor runs something that's called a "universal revue" every 30/60 days depending on the creditor ... it's not new, and it's inside all of those little bitty contracts they send everyone .. except nobody ever reads them.

As the mortgage payment becomes late, it flies a flag that the other creditors can see ... usually the first thing that happens is those nice 8.99% credit cards, turn into 18.99% on the first 30/60 days .. it's perfectly legal, and it's also on all of those little bitty contracts that nobody reads ...

As the mortgage payment becomes later, longer ... the other creditors pick it up and pretty soon those nice little 18.99% credit cards become 28.99% (depending on your state usury laws) ...

By this time .. they just flat cancel the cards because your creditors are seeing the mortgage and others go late, or fall into a R9 status "closed" (it becomes a domino affect) even though you're trying to do the right thing by setting arrangements for this 5 month past due "short sale" ...

Remember, creditors look for the here and now, not the maybe next month routine ... by this time, you can bet your FICO has dropped from a 780 to a 580 (or less) and it will take you the next 25 months to get you back to 650 if you're lucky -- it's just not the "short sale" ... it's how the short sale effects everything else.

There's a huge amount of very bad information going around the internet right now .. "you only lose 150 points .. you can buy a new house in 12 months .. the bank loves to do short sales." ... Not.! .. lender "A" is only concerned about lender "A" .. of course you have lender "B", "C", "D" involved also ....

If you do decide to do anything .. you need to get with an experienced attorney that knows and understands the credit industry, not a paper pusher, not a guy that does BK's (anyone can do that) .. but an experienced attorney that knows credit and the current real estate market and how it effects you on a daily basis ....

I'd rather spend $900 on a attorney to tell me, than to flush $900,000 away because I couldn't be told ...

As you can see, the point system is just not true as explained - not even close.

Sincerely, good luck ...
1 vote Thank Flag Link Mon May 5, 2008
As long as the bank does not come after you with a deficiency judgment your credit should be safe. This can be stipulated in the contract between the buyer and the bank. I buy houses this way. If you would like me to do your short sale and buy your house, contact me.

Regards,
Will Robles

888.605.9190 ext. 1
will@firstcasasolutions.com
0 votes Thank Flag Link Sun May 4, 2008
Hi Ron, I would first like to say...Everything that seems to be so terrible today will not be so over time.
Fred G. is right, Your FICO will be hit. I would only add it may be a bit deeper than 100pts. More likey, you will see as high as a -180pt hit. There is a theory running around..maybe it is mine..that in the next few years credit reporting agencies will adjust their formulas that will allow someone, like yourself who has concerns and will likely work hard to repair the damage caused by the short sale, be rewarded and see a better FICO than today's formulas reflect. I wish you good luck and keep working hard to educate yourself!

Michael
http://www.MichaelRobertsHomes.com
0 votes Thank Flag Link Fri May 2, 2008
My understanding is that the short sale will affect your Fico score around 100 points.
On the other hand I understand that a foreclosure will tap you up to 250 points.
You are not alone so the effect may be watered down as the Foreclosure impact broadens across the country. It is a situation that is unfolding and growing daily. Keep the faith
0 votes Thank Flag Link Fri May 2, 2008
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